By Sean Geary
Yesterday was a mixed bag for global stocks - although stocks with Chinese exposure were hurt after the Shanghai Composite tumbled more than 3% on fears of a housing bubble, other country-specific macroeconomic news was much more positive. For example, this weekend Panama reported its second consecutive year of double-digit growth.
While there may be some concern that the economy is overheating, for now the economy is celebrating some of the world’s most impressive growth. As a result, investors are looking for opportunities to gain exposure to this high-flying economy through equities with ties to Panama; Panamanian carrier COPA offers such an opportunity.
Not only does COPA offer investors the ability to gain from Panama’s growing economy, the company’s well-placed Panama City hub allows the company to take advantage of the overall increase in trade between North and South America.
Although COPA dropped precipitously after its most recent earnings report, the company is still growing and trades at reasonable valuations - at a forward P/E of 10, this quickly expanding firm may be a bargain. If the stock can break through resistance around $110, COPA could head much higher.
COPA was not the only Latin American carrier to outperform in Monday trading; Brazilian carrier GOL jumped 5 percent after the company indicated that it would begin to reduce jobs in order to streamline operations and reduce costs.
Although GOL may have jumped yesterday, the stock is nowhere near as attractive as its Panamanian counterpart. While COPA is profitable and continues to expand, GOL has been forced to cut back services as a result of a difficult operating environment in Brazil as well as company-specific fiscal problems. Future profitability in the company over the next few quarters remains uncertain, although it will likely see profits when air travel demand surges during the World Cup in 2014. Furthermore, the stock could be facing some resistance at its current levels against the 50-day moving average.
As a result, traders looking for exposure to the Latin American aviation sector should look at the reasonable valuations of COPA over the less compelling financials of GOL.