In times of economic uncertainty in Argentina, it is essential to find investment alternatives that allow you to protect and grow capital. An increasingly popular option are CEDEARs or Argentine Certificates of Deposit, which They offer the possibility of diversifying investments in foreign companiesbut from the comfort of the local market.
What are Cedears and how do they work?
CEDEARs or Argentine Certificates of Deposit are financial instruments that represent shares of foreign companies, but they are traded on the Argentine Stock Exchanges and Markets (BYMA).
When you buy a Cedear, you are buying a certificate that entitles you to a specific number of shares of a company listed on foreign markets like Wall Street. And they represent a part of that action which the amount of income to get into is low. They are negotiated in pesos and dollars, which can be used for surplus pesos or for the dollars that are saved.
The advantages of investing in Cedears
1. Geographic Diversification
They allow you to invest in companies around the world without having to open an account abroad.
2. Protection against Devaluation
Being backed by foreign shares, CEDEARs help you protect capital against the devaluation of the Argentine peso. They are negotiated in pesos and dollars.
The largest companies on the market offer to invest in their Cedears (instruments that represent a portion of their shares).
3. Access to Large Companies
You can invest, for example, in Apple, Google, Amazon, Nvidia, Meta, Vista, Bitfarms, Coinbase, etc. There are over 320 stock options to choose from at BYMA. (www.Byma.com.ar) Below I comment on some that I recommend.
4. Dividends in Dollars
They provide the possibility of receiving dividends in dollars, which can be very attractive in a context of high inflation. And it is possible to choose Cedears that pay dividends periodically.
The risks and disadvantages of Cedears
1. Market Risk
Like any investment in stocks, CEDEARs are subject to the volatility of the stock market, and are variable income which depends on the sale and purchase price. This is why they are recommended for the medium or long term, more than 6 months, my recommendation.
2. Currency Risk
Although they are less exposed to peso devaluation, they are still subject to exchange rate fluctuations. If the idea is to exit the investment in pesos and be looking at the investment in this currency, if the cash with low settlement there is a risk of having fewer pesos, even if the stock rises (to a lesser extent).
Which cedars are attractive today and why?
1. SPY (S&P 500 ETF)
It replicates the S&P 500 index, made up of 500 of the largest US companies.
It has historically been a solid option for diversifying investments with exposure to the growth of large US companies.
The price (in pesos and dollars) of some of the most attractive Cedears on the market today.
2. DIA (Dow Jones Industrial Average ETF)
It follows the Dow Jones Industrial Average index, made up of 30 large companies in the US.
Similar to SPY, but with a portfolio more concentrated in blue chips.
3. Berkshire Hathaway
Conglomerate run by Warren Buffett, famous for his long-term focus.
Known for its stability and long-term growth.
4. Coca Cola
Global beverage company.
Stable, with good dividends and a strong position in the market.
5. Free Market
Mercado Libre is an e-commerce and financial services platform in Latin America.
It has shown significant growth with the rise of e-commerce in the region.
6. UnitedHealth Group
Health insurance company.
Stable, with growth in health services.
7. McDonald’s
Global chain of fast food restaurants.
Stable with good dividends.
8. QQQ (Nasdaq100 ETF)
Follow the Nasdaq100, focused on technology.
High volatility but great growth potential.
9. Vista Energy
Oil and gas exploration and production.
It depends on oil and gas prices.
10. Nvidia
Graphics processor technology.
Nvidia plays strongly in the gaming, Artificial Intelligence and autonomous car sectors.
Although it registered a pronounced decline, Nvidia’s Cedear projects considerable growth for the remainder of the year.
11.Amazon
E-commerce and cloud services.
Leader in e-commerce, with high volatility and great potential.
12. Meta (Facebook)
Social networks and virtual reality.
High volatility with strong presence in digital advertising.
13. Google
Internet search and technology.
Stable with high profitability in advertising and technology.
14.Microsoft
Software and cloud services.
Stable with good dividends and growth in the cloud.
15. Walt Disney
Global entertainment and theme parks.
Volatile due to the pandemic, but with solid fundamentals.
Cedears can be created in pesos, through a broker or a stock exchange company.
16. Coinbase
Cryptocurrency exchange platform.
Volatile, dependent on the cryptocurrency market and adoption of blockchain technology.
17. Bitfarms
Company dedicated to cryptocurrency mining.
Highly volatile, dependent on the profitability of cryptocurrency mining and crypto prices.
The table describes Cedars options with their prices in both pesos and dollars.
How to Invest in CEDEARs?
- Open an account in a stock company or broker that operates in Argentina.
- Select CEDEARs: the choice should be based on the risk profile and investment objectives, and the weight that will be given to the CEDEARs in the investment portfolio depends on that.
- Make the Purchase: place a purchase order through the broker’s platform.
- Monitoring and Management: monitor the performance of CEDEARs and make adjustments as necessary.
Cedears represent an effective alternative to diversify the portfolio and protect against devaluation. Like any investment, it is important to research and understand these instruments well before making decisions. Furthermore, you should not only consider purchasing a single option, but also the possibility of putting together a diversified portfolio. For those who do not dare to buy CEDEARs directly, there is the option of acquiring shares of common funds that include these assets and thus buy a portfolio of these assets with a single investment.
