Some of the greatest fortunes have been made by investing in long-term trends. As developed countries like the U.S., Japan, France, and others stagnate due to high debt levels and decades of over-consumption, other emerging market countries are just starting what could be very strong trends for rising incomes and consumption as they catch up to the developed world. The opportunities and reasons for the growth trend were recently detailed in an article that stated:
There's an emerging group to watch in emerging-market hotspot Latin America: a swelling middle class. This population shift is an important development for investors, especially those with a longer-term horizon. No longer will the economies of Brazil, Mexico, Chile, and their neighbors have to rely primarily on strong global demand for commodities grown and mined in the region. Now, the investment story is shifting toward the improved income of a relatively young population. These days, many emerging countries have relatively low levels of unemployment and a better fiscal position compared with their developed counterparts.
The article goes on to state:
And that familiar commodities profile doesn't hurt either. "Since Latin America is commodity-rich (given its large endowment of natural resources), it experiences a significant positive 'wealth shock' when commodity prices rise," says Goldman's Ramos. "The macro resilience accumulated in recent years has better prepared the region to withstand negative price shocks, and so a downward correction of commodity prices should not in itself trigger disruptive macroeconomic dynamics.
While the article offers some great choices for investors seeking mutual funds that invest primarily in Latin-American stocks, some might be better off investing directly in individual stocks that could offer more risk but also possibly, substantially higher returns. The market has punished stocks that have not met earnings estimates and/or other expectations and this has provided what might be a great buying opportunity for investors willing to buy now. Here are some former Latin America stock darlings that have fallen to levels that could provide substantial gains, possibly even doubling in the next year or so:
America Movil (NYSE:AMX) provides communication services and products such as mobile phone and Internet to a number of Latin American countries such as Mexico, Guatemala, Ecuador, Brazil, Argentina, Colombia, Panama, and other countries. America Movil should see strong revenue growth in the future as the middle class consumers in emerging market countries put rising incomes into conveniences like cell phones and Internet usage. This stock was trading around $25 in November but has dropped to levels that are attractive for long-term investors.
Here are some key points for AMX:
Current share price: $22.50
The 52-week range is $20.65 to $29.81
Earnings estimates for 2011: $2.02 per share
Earnings estimates for 2012: $2.14 per share
Annual dividend: 26 cents per share, which yields 1.2%
Southern Cooper Corporation (NYSE:SCCO) is based in Arizona, but it has copper mining, and refining operations in Peru, Mexico, and Chile. This stock recently plunged to new lows, along with the price of copper. Much of the concern is based on whether China will keep buying copper and other commodities at the same pace in the future. If demand from China is stable, then this stock has probably seen the lows and will remain supported by the very strong dividend yield.
Here are some key points for SCCO:
Current share price: $30.72
The 52-week range is $22.58 to $50.35
Earnings estimates for 2011: $2.81 per share
Earnings estimates for 2012: $2.79 per share
Annual dividend: $2.80 per share, which yields 9%
Petroleo Brasileiro (NYSE:PBR) is a leading oil and natural gas company, based in Brazil. This company is poised to benefit from Brazil's growing middle-class and increased consumption. Brazil is an oil rich country and that is likely to fuel growth at PBR for many years to come. PBR shares are trading well below the 52-week high and even below book value of $27.01. This looks like a solid buy for long-term investors.
Here are some key points for PBR:
Current share price: $25.47
The 52-week range is $20.76 to $42.75
Earnings estimates for 2011: not available on Yahoo Finance
Earnings estimates for 2012: not available on Yahoo Finance
Annual dividend: 16 cents per share, which yields .6%
VALE, S.A. (NYSE:VALE) is a leading producer of iron ore, steel, fertilizer and other basic materials. VALE has been in business since 1942 and is based in Brazil. This stock appears undervalued however, if we see another major global financial crisis, this stock looks vulnerable, especially if China demand for iron ore drops. Since there is both a compelling value argument and also risks due to global economic weakness, it makes sense to just take a partial position for now and add on further weakness.
Here are some key points for VALE:
Current share price: $22.07
The 52-week range is $20.46 to $37.25
Earnings estimates for 2011: $4.60 per share
Earnings estimates for 2012: $4.11 per share
Annual dividend: 6 cents per share, which yields .3%
Itau Unibanco Banco Holding S.A. (NYSE:ITUB) one of Brazil's largest banks. While the banking sector is much healthier in Brazil compared with other countries, it is still vulnerable to systemic shocks in the financial markets. Itau shares recently dropped to about $16, and that is the type of buying opportunity it makes sense to wait for. It probably only makes sense to consider a small position in any bank at this time.
Here are some key points for ITUB:
Current share price: $18.55
The 52-week range is $14.47 to $24.77
Earnings estimates for 2011: $1.82 per share
Earnings estimates for 2012: $2.00 per share
Annual dividend: 8 cents per share, which yields .4%
Embraer S.A. (NYSE:ERJ) is a manufacturer of jets, turboprops and other aircraft. It also makes military aircraft and defense and aviation security products. Embraer has a solid balance sheet and a book value of about $17.11 per share. A weaker global economy could limit revenue for Embraer as demand for corporate jets could be sluggish. That concern might already be priced into the stock as it is down significantly from the 52-week high. Long-term investors can buy this undervalued company, especially on any dips.
Here are some key points for ERJ:
Current share price: $25
The 52-week range is $20.98 to $35.41
Earnings estimates for 2011: $1.92 per share
Earnings estimates for 2012: $2.43 per share
Annual dividend: none
Gol Linhas Aereas (NYSE:GOL) provides passenger air transportation services to a number of countries such as: Brazil, Argentina, Barbados, Bolivia, Chile, Colombia, Paraguay, Venezuela, and others. Gol is a low fare airline and it should see growth, especially during the upcoming Olympic Games in Brazil. This stock was trading around $8.50 in November but has dropped to levels that offer value for long-term investors.
Here are some key points for GOL:
Current share price: $6.78
The 52-week range is $5.03 to $16.48
Earnings estimates for 2011: a loss of 83 cents per share
Earnings estimates for 2012: a profit of 31 cents per share
Annual dividend: 10 cents per share which yields 1.5%
Data sourced from Yahoo Finance. No guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.