Mexico has been taking it on the chin recently.
Never one for economic stability, and carefully avoiding to implement any meaningful economic reforms due to its ability to export its surplus labor and demographic problems to the States, the Don's much-ballyhooed opposition to unfettered illegal immigration and his well-publicized distaste for NAFTA have been resulting in a small number of U.S. corporations canceling their plans to expand their Mexican manufacturing capacities.
The hoped-for effect - an increase "well-paying middle-class manufacturing jobs" - seems YUGE but has actually been disproportionately modest when compared to the media coverage. Thus far, all the U.S. jobs saved (or better, whose exportation was expediently postponed) probably won't fill the seats at a Hillary Clinton pep rally.
Then again, it's the thought that counts. And apparently, previous administrations had been unable to think beyond the rim of bureaucratic processes…
Accordingly, the Mexican peso hit a fresh record low, after Ford (NYSE:F) said it had canceled plans to build a new plant in San Luis Potosi.
One greenback now buys 21.3953 pesos.
Our old friend from the early TAIPAN days, the Mexico Fund (NYSE:MXF) also quivered like day-old flan when a Mack truck drives past the house.
I'm not saying that, at below $14.00 a share today, this stock couldn't lose another 20% over the next two months, with a downward spike probably staring tomorrow:
A cash dividend payment of $0.141 per share is scheduled to be paid on January 17, 2017 to shareholders who purchased MXF prior to 1/4/2017. The stock has a 52-week high of $18.24 and a 52-week low of $13.70.
But I think this is not a bad opportunity. While the fund's dividend has nose-dived from 86 cents a share in late 2013 to a measly 14 cents, I don't think that even the most protectionist rhetoric is a match for the combined forces of due process of law and bare-knuckles macroeconomics.
Consider this: Every drop in the peso lowers production costs correspondingly, in turn making Mexico more attractive as an outsourcing location. And in the end, profits and shareholder expectations trump political expediency.
Even short-term effects on Mexican employment will increase Mexico's bottom line. The country's main exports are oil and people. If oil goes up because America is being Made Great Again, Mexico benefits. If a rise in unemployment disgorges more Mexican illegals in the economy of the Estados Unidos, the $25 billion (accounting for 2% of Mexican GDP!) it received last year through personal remittances is likely to increase.
I say let's give it a shot at current price levels: Buy the Mexico Fund at or below $13.80 between now and January 20.
I think we might get a rise to $15.50 by Tax Day.
Disclosure: I am/we are long MXF.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: We will be covering the recommendation in www.jonesfallsfinancial.com