Buy Repsol to profit from looming Argentinian nationalization

Argentine newspapers are reporting that President Cristina Fernández de Kirchner will announce the nationalization of energy company YPF SA (YPFquote) when she meets with provincial governors today. 

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Owning shares of Repsol SA (REPYYquote), the Spanish oil giant, could be the most prudent way to profit from this political instability.

Repsol owns 57% of YPF. Due to the worries about YPF’s nationalization, Repsol’s share price has fallen drastically. At $23.67, Repsol is trading close to its year low of $22.90. YPF is in similar straits, down 39.13% and currently trading near its 52-week low of $20.71.

Despite a majority ownership of YPF, Repsol does not trade in correlation with YPF. As YPF was falling in January, Repsol was rising, and Repsol rose 1.81% on April 11 while YPF was off by 5%. It’s highly probable that the market has priced the political risk factor from Argentina into Repsol’s share price.

From this, traders can profit from the eventual outcome of YPF through owning shares of Repsol — and while they’re waiting for the dust to settle, they can enjoy Repsol’s 6.38% dividend yield.