Finding Investing Pearls in PIIGS Countries

Swelling budget deficits and widening trade imbalances in Portugal, Ireland, Italy, Greece, and Spain have earned these nations the unflattering name "PIIGS," as well as mostly negative outlooks from the major credit-rating agencies. Bad publicity and elevated risk have caused equity investors, fearful of another liquidity crisis, to sell off holdings. That has pushed down prices, creating buying opportunities for those who know where to look. Here are some industries and companies that fund managers familiar with these countries say they're hanging on to—and some they're avoiding.

The situation in Greece is dire, as you can tell from the Athens Stock Exchange General Index, which has lost about a third of its value since peaking in October. But T. Rowe Price's Tenerelli doesn't expect the country to default on its debt and has about 2.5% invested in Greece. "It is a great time for buying quality companies that don't have a lot of debt and have good business models." He likes National Bank of Greece, one of the few banks, he says, whose loans don't exceed deposits. Tenerelli also likes toy retailer Jumbo, which trades at about 10 times earnings.