Larry Bellehumeur

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