Latin America - Emerging markets investments "Los Cincos Amigos"

Santi Lopez | Feb 29, 2012
Earlier this week we touched on increasing globalization in investing.  Where Sir John Templeton first ventured one now finds many dabbling.  When assessing export markets one considers different criteria than company investments.  However macro trends, which often form the basis for a single security recommendation, can be central to an international business development market selection process. 

Now focused more specifically on Latin America.... 

Bright spots

The article, Top 5 Latin American Stocks for 2012, by James Vohwinkle warns investors of the events which further aggravated the recession throughout Latin America last year. Brazil's inflation, Chile's economic collapse, Colombia's security issues and Peru's political instability to name a few. 

Though challenging "head winds" exist, Latin America remains a dynamic and vibrant region.  Abundant natural resources and increasing interconnectedness and globalization are supporting the rapidly expanding middle class.  There are compelling commercial opportunities and as the article highlights, some likely winners among Latin American stocks that the writer is bullish about. 

  • Ecopetrol stock is traded in NYSE as EC. It’s a state operated company and Colombia’s largest oil driller/producer. Colombia happens to be among the world’s top five oil producers and is anxious to raise its output levels. 
  • Petrobras shares are also traded on the NYSE as PBR and it’s perhaps the world’s worst performing oil stock. It has performed exceptionally poor over the last two years, but could be a lucrative steal for 2012 as it is currently very undervalued. 
  • Another Brazilian stock worth considering is ‘Brasil Foods’. This too is traded in NYSE as BRFS. It is a Brazil-based food company and one of the top traded and best performing U.S. listed Brazilian stocks. The stock has recently surged by about 21 percent, and apart from Brazil, the stock has made a splash in other emerging markets such as Russia. 
  • Banco de Chile offers the 4th stock opportunity and it too is traded on the NYSE as BCH. Although, financial stocks faced a very bad year in 2011, this one has been an over-performer. Its last dividend yield exceeded that of any bank stock in the US! 
  • And finally, Bancolombia, the 2nd pick from the leading nation in the Andean region, is Colombia's biggest bank. It also trades on the NYSE as CIB and happened to perform much better than any other international bank stock last year. Given the expected consolidation of the banking sector in Colombia, this stock is expected to perform well. Moreover, the country's overall credit rating and balance sheet is expected to continue to improve in 2012, so Bancolombia shares are relatively good bet!

A slam dunk?

Of course not.  And Vohwinkle could be wrong.  The stocks could fail to perform, or exceed expectations, just as the markets themselves may. 

One fact is clear, however.  Global investors increasingly seek prudent diversification.  In that pursuit they are much like international business people.  The goal of international business expansion is to anticipate trends and market growth, and identify the key opportunities for one's product.  There will be mistakes, however, so balancing expectation against downside risk, and blending opportunity profiles across regions, countries or even metro areas is critical to the long-term success of an international business development initiative. 

Consilium Global Business Advisors helps companies develop strategies to enter vibrant emerging markets, and properly diversify the effort across regions and markets.  Interested in your stock portfolio?  Call your broker.  Interested in diversifying your business internationally?  

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