Hi,
I'm starting to do some research on Latin American funds -- particularly interested in Brazil as the market has taken a substantial hit over the last 5 years. I'd greatly appreciate it if folks on the board could steer me to: 1) good funds in the category that I can read up on more. 2) Good research that I can read on the Latin American market as a whole. This will be for just a small portion of my funds and I understand that there is risk here. Would value your thoughts. thanks.
Comments
I've been looking at them for a while also, and just too many problems south of the border for me....Brazil, most notably.....from politics to oil.....just not much there especially no QE (LOL).
JMO
God bless.
the Pudd
In the last 6 months, the stock in Brazil is flat, the US ADR shares are -20% due to currency fluctuations (the Brazilian real has gotten wrecked.)
I've traded it before, but recently decided to make it a long-term position.
The only other Brazil investment that I've thought about is AmBev (ABEV) (aka Budweiser Latin America and the distributor for Pepsi in LatAm.)
Both companies offer nice dividends, but are more than a little volatile. If the real stops going down and actually heads the other way from something like a 10-year low, the shares would seen some benefit from the currency move.
Femsa in Mexico is also interesting with stakes in Coca-Cola Femsa and giant convenience store chain Oxxo (the largest and most profitable convenience store chain in Latin America) and a large stake in Heineken.
I wouldn't own a fund, but the only fund I'd consider if I was would probably be T Rowe Latin America.
YTD -(3.34)%
1yr. -(8.16)%
3yr. -(11.08)
5yr. -(3.89)%
PRLAX:
YTD: -(1.64)%
1yr. -(6.19)%
3yr. -(12.51)
5yr. - (5.18)%
EWZ:
YTD: -(4.16)%
1yr. -(10.72)%
3yr. - 17.59)%
5yr. -(9.31)%
SPY:
YTD: + 2.06%
1yr. + 16.87%
3yr. +18.11%
5yr; + 16.53%
Wash these thoughts out of your head, just so no to Latin American Funds, PRLAX, EWZ at the present. Take any monies you were thinking of investing in Latin American and put them to work in the USA.
Regards,
Ted
We all know analysts are often wrong, but I do think the odds are we're 10-20% and a year or so away from a bottom. Not a bad time to start buying, but I would dollar-cost-average in. Risks remain high. Other Latam countries (Peru, Colombia, Chile) are in better shape, but everyone knows that, so they're not as cheap.
You've got to remember when you analyse the fair value of Brazilian stocks that money market funds pay 12% interest, and you can get inflation-protected government bonds with a real return of about 7%. (In reais, of course, not dollars, so you've got currency risk, which I wouldn't want right now.) But when bonds pay so much, stocks should be cheap. You cannot compare Brazilian p/e ratios to those in the developed world or China.
My two centavos' worth.
The interview is here:
http://www.wintergreenfund.com/news/2013/0719-wealthtrack/
The Cielo discussion starts at about 16 minutes in.
I think my "issue" is that I'd like to invest a little bit in Brazil. My problem is that I like to do so in a way that I can get my head around. A fund can be volatile, too, but if I can have a thesis for something like Cielo (which goes along with the larger holdings that I have that are payment-related), it's easier for me to hold through the volatility than a fund that I don't have a real connection to/thesis for and may just dump if things get rocky (well, with how Brazil is now, rockier.)
I definitely like the payments space (a lot) and Cielo has a very large share of the market in Brazil. Cielo also bought US company Merchant E-Solutions (https://www.merchante-solutions.com/about-us/overview/)
Also, Cielo is an ADR where I can actually reinvest dividends. It varies by brokerage, but I've found that DRIP/reinvesting is usually no problem with US shares. When you get into ADRs or foreign ordinaries, then it becomes possible much less often and seems almost random as to what can/can't (possibly depends on which bank is the adr depositary?) Additionally, Cielo has also split twice in the last four years or so.
Anyways, it's not something that I'd recommend for a conservative investor at all. It's my way of investing in Brazil in a manner that I can feel comfortable with longer-term. Most people COMPLETELY UNDERSTANDABLY (and again, they're certainly not wrong) feel more comfortable if they were to invest in something like Brazil investing in a fund. I'm weird though and feel more comfortable investing in one company whose business I can wrap my mind around and feel fairly strongly about long-term.
For me, investing in the last few years or so has become, how can I structure my investments in a way that allows me to feel comfortable with a long-term view point and far less concerned about the day-to-day. The funny thing is, for most people, that would likely involve being less in single names and much more in funds. I feel more comfortable more in single names than funds because I feel strongly about various themes, sectors and companies. Plus, nearly everything I own pays a dividend.
Again, I'm weird - most people would understandably feel more comfortable in funds and probably rightly so. Older and/or more conservative investors should go the fund route.
Again, Ambev (ABEV) was the other name that I often thought about in terms of Brazil, but ultimately was more interested in the payments space. As I also noted above, Femsa (FMX) is something that I've thought about a lot, but I think the issue that I had with Femsa is its investment in Coca-Cola Femsa and the obesity problems in Mexico. There was a terrific hour-long presentation by a futurist in front of Femsa execs on Youtube and one of the major topics of discussion was in regards to health issues. (edited to add: found it)
Mexico ultimately decided on a soda tax to combat one of the world's highest obesity rates (http://www.theguardian.com/world/2014/jan/16/mexico-soda-tax-sugar-obesity-health) and it's apparently been successful.
While the conglomerate nature of Femsa is appealing, as is its reasonably solid track record, the problem that I have is: what's the future? The company's Oxxo stores are very compelling, but I have no interest in investing in Coca-cola in this country or any other (Asian conglomerate Swire is a Coke bottler, another company I want to like but can't.) Bill Gates was a large shareholder in Femsa for a while, but I believe he sold his shares not that long ago.
Although, that said, there was an interesting article on "The Most Successful Company in the World" the other day, and it wasn't a company that makes things that are good for people. (http://www.fool.com/investing/general/2015/02/13/the-extraordinary-story-of-americas-most-successfu.aspx)
I certainly don't own all things that are good for people. I own a liquor stock, although it's not a large holding. People do drink in good times and bad, but I think what's really kind of compelling is that you have this enormous industry where the big public names are now down to a few (and one less after Beam was recently bought.)
Long, rambling story short,
1. If I'm invested in a single name, the intent is a long-term holding with reinvesting dividends. It may have periods of under-performance, but I'm definitely diversified.
2. Most people should go with a fund and if I were to go with a fund, I'd likely go with T Rowe Latin America.
I don't have any money in Latin America at all. I've just "cleaned house." In my own portf. I'm now holding 7% cash, 29% USA equity, 25% foreign, 37% bonds. "OTHER:" 2%. Japan, hardly a thing. 29% is in Asia. In US/Canada, the number is 54.25%. No more Matthews at all. Asia is covered with PRASX.
I looked at that and really liked the look of it but there didn't (maybe there is now, I haven't looked) seem to be any way to invest in it in the US (ADR shares, etc.)
http://quote.morningstar.com/stock-filing/Quarterly-Report/2014/9/30/t.aspx?t=&ft=&d=3c6222818844f9d0b1e91db90274bcd9
http://www.validusa.com/valid-contact-us/
EM debt picture (albeit, the hard currency kind) is not speaking favorably to the notion that now is a good time for hopping big into a Latin American theme. Maybe just give the idea a complete rest for now, and come back every 3-6 months and re-access.