Larry Bellehumeur

Multinationals: A Safe Way to Play the Coming Drop in the U.S. Dollar

Moon - I sure hope you are wrong, in term of Stimulus II, but you could be right. It would be a disaster, and make this article all the more relevant (something I wouldn't want). It would also mean that the upcoming Inflation issue would be a nightmare for a decade or more....

William -- It is a good point. The main reason that I was focusing on ADRs is the for the simple availability for everyone. As an example, being a Canadian, it isn't as easy for me to buy Foreign-listed stocks in London. Ultimately, the same effect would happen, just in a slightly different way (ADRs would appreciate because a depreciating dollar would boost the earnings per share, where as buying a Foreign listed equity in US dollars wouldn't help the earnings, but you would see the same benefit directly from the currency). Good point....

TheFounder - Also a valid point. My main goal for this article was more to bring up the likelihood of a US dollar drop (which is happening today, ironically), and to give some ideas on how to play it (aside from the usual Gold and other plays). There is no perfect balance, and I would recommend that investors of all ranks hold a large selection of them. Many of them, such as Gold and Oil Stocks, also offer an Inflation hedge, in case that happens too.

Thanks for reading!
Larry

Multinationals: A Safe Way to Play the Coming Drop in the U.S. Dollar

Hello Everyone,

Dave - The dollar has held up better than I would have ever expected in the past little while. All of the points in the article have been in place for at least months (if not, in the case of trade deficits/debt, years), but the market often flocks to what it knows in times of distress, I guess....

PVizzle -- I definitely wouldn't use these stocks as the ONLY way to play a falling US dollar. I wouldn't even use only stocks in general....gold, Energy Producers, Energy Services companies, REITs, TIPS and other instruments are all going to be necessary for every investors portfolio. I agree that Resource stocks can be a great hedge against a falling greenback. However, they do carry a fairly high level of volatility, and not all investors can stomach that. I wrote an article about Dr. Stephen Leeb a while back, and posted some recommended long-term resource plays in there, including Ag stocks.

To add to your other point, I hate to speculate too much in articles, although, one has to wonder just how long the rest of the world will continue to use the Greenback as both the Main world currency and as a way to price Global Commodities. If either one of those positions were to slip, look out below!

As for companies such as Monsanto, ADM, Syngenta, they do have a good future, and would be good choices to balance off US dollar exposure. You could arguably add in Mosaic, Potash and Agrium......only recently did they ever get down to an evaluation that even remotely made sense to me, however. I have owned Potash in the past, but flipped it out at close to $190 before (didn't reach the top, but didn't lose my shirt on the way down).

Disclosure - No position in any of the Ag stocks, long on a bunch of Energy producers/services, REITs, Gold and TIPS. So, you can see that I think inflation is going to kick in soon!

Cheers to all
Larry

Three Long-Term Investments in Latin America

Tilapia -- you are very welcome. I have a posting on Covestor, where you can track what I do. i usually write an article about once a week normally.....

Three Long-Term Investments in Latin America

138602 -- Thanks for the kind words. I have seen some of their wines at my In-laws parties before, but I don't know anything about their market share, distribution systems or retail presence (all things that I would want to know before investing in a beverage company of any kind, including wine).

Here are some quick thoughts on the company, from its stats:
1) Decent RoE of 16+% means that they should grow organically
2) Payout Ratio for their Dividends seems a bit high (about 70% for
2008, according to Yahoo) for a company that is still trying to grow
3) The Analyst estimates have been rising for both 2008 and 2009
earnings. This would carry a lot more weight if there was more
than one analyst covering the stock, though.
4) One thing that does scare me is how thinly traded it is...you weren't
kidding! This might lend to some extra volatility in the stock, which
can be good and bad....

Three other factors that you may consider:
1) As people get older, they tend to drink less (no more college dorm parties, I suspect), but they tend to drink better. This plays well in stocks such as Diageo, and should help VCO.

2) Emerging markets are starting to become purchasers of finer items, such as Coach Bags and Mercedes cars. This does play well into the luxury or upscales markets and should also benefit VCO

3) Chilean wines are starting to become more known in North America. I remember being in Toronto and there was a very large Chilean Wine festival.

Based on its numbers and the favourable demographics, this one should be a good long-term hold. You could probably get it at a lower price, I would suspect, as I think that smaller-cap stocks may still have a leg down. Try to see if it goes down to test its 52 week low, near $33 before stepping in.

I would also do some further research on its market share, and how it is fairing in different parts of the world. Because most of their growth is coming outside of Chile (their volumes are not growing domestically as fast as everywhere else), you may also have to watch how the Chilean currency performs against other large nations, as they will affect profit. Finally, a lower US dollars usually helps ADRs buyers.

ddt -- thanks for the heads up on NIHD. Looks like it might have some good upside, providing that you can handle the choppy ride....

Cheers
Larry

Three Long-Term Investments in Latin America

Thanks Mark, for taking the time to read and comment. I'm not that familiar with how an Australian would buy these stocks. Besides trading on the various exchanges in Latin and South America, they also trade in New York as ADRs (Basically, they trade in US dollars, like a US stock would.) The tickers that I have listed in the article are for US Traders. If your accounts allow you to buy American equities, this would be the easiest way. You'd have to worry about how the Aussie dollar did against the US Dollar, as part of your evaluation as well. Let me know if this was the type of information that you are looking for.....

In terms of Chile, I also once believed that it had a reputation for corruption, like many countries in South America. That couldn't be further from the truth.....while it has had some issues in the 70's, it is now a very safe place to invest, and prosper.

FYI -- I've made some good money over the years, owning Aussie stocks. From Macquarie Infrastructure, to BHP Billiton to Commonwealth Bank, I've been happy with the performance for sure!

Cheers
Larry

Three Long-Term Investments in Latin America

Mr ED,

That is an interesting point, and one that does have some merit. My only concern with that approach is it depends on the type of fund that you are looking into. Most mutual funds tend to not want to "rock the boat" by holding something that could expose them to the chances of vastly underperforming the market. Therefore, they all tend to hold the same batch of stocks, just in slightly different weightings. If one were to choose one of those, then they are better off in a wide-spread ETF.

In terms of individual investors, one advantage that they would have (unless we are talking about a mega-rich person) is that they are able to use more flexibility by taking positions in stocks that pros might not be able to (due to lack of liquidity needed for them to take substantial positions or due to not being able to stray away from the core focus of their funds). If used properly, this is a huge advantage for the retail investor.

However, if they are not willing to put in the time or effort, you are absolutely correct....

Cheers
Larry

Three Long-Term Investments in Latin America

Thanks for reading, everyone....

Surfgrrl - the quick answer is that it shouldn't have a huge impact on the company's overall earnings. Venezuela was responsible for about 1% of its sales in 2007, and it was actually slightly down from 2006. At most, it might subtract about 4 to 5 cents off of the 2009 Earnings expectation for the ADR, so about 50 to 75 cents off of the Price target. Still makes it a good buy.....

Gato (or can I call you Cat) -- I know that BCH only pays dividends once a year, so this often throws off how many web pages reports its yield. I chose one of the more conservative ones, as the dividend is not like most stocks who maintain it. The Board tends to approve the number based on a year to year, and does not always try to increase it from year to year like most companies. As well, it used to be that some of the dividend (when I owned it a while back for sure) was paid in Shares, which could mean that the lower number reflects the cash only, and the higher number reflects both shares and cash. Either way, it is a generous dividend, and definitely makes this stock an attractive buy.

Cheers
Larry

Three Long-Term Investments in Latin America

thanks for the clarification, Chemist. Worst thing is that I actually read that the other day, and still put them in! Chavez is an an interesting fellow, to say the least!

Cheers, Larry