Tuesday, April 24, 2007

Investing South of the Border

According the the CIA World Fact Book, Mexico is the 13th largest economy in the world as measured in Gross Domestic Product in purchasing power parity. The World Bank considers the Mexican economy to be an Upper-middle-income economy [rated higher than Brazil and China, which are considered Lower-middle-income economies] and they have the highest per capital income in Latin America. In 2005, inflation reached a record low of 3.3% in Mexico, and foreign debt was decreased to less than 20% of GDP. They have free trade agreements with United States, Canada, the European Union, Japan, Israel and many other countries. With such a strong economy, there are several investment opportunities with Mexican stocks.

Unfortunately, many of the largest companies trade primarily in Mexico and occasionally on the pink sheets in the United State. These include Wal-Mart de Mexico (WMMVY.PK) and Grupo Indl. Bimbo SA (GBBAF.PK), Mexico's largest bread maker. Probably, the best way to invest in these would be to use the Mexico Equity & Income Fund Inc. (MXE), which is a closed end stock and bond fund that invests in Mexican stocks.

But fortunately, there are a few stocks of Mexican companies that have ADR's that trade on the New York Stock Exchange.

American Movil (AMX), a Mexico based company, is a provider of wireless communications services in Mexico, Argentina, Brazil, Chile, Colombia, Guatemala, El Salvador, Nicaragua, Honduras, Ecuador, Paraguay, and in Peru. Talk about Latin American diversification! P/E is 23.5 and the PEG is .53. They even pay a small yield of .7%. This is one of the companies controlled by Carlos Slim, the second wealthiest man in the world.

Another Carlos Slim company, Telefonos de Mexico (TMX), is the largest telephone company in Mexico. They also provide telecom services in Brazil, Chile, Argentina, Peru, Brazil, Argentina, and Colombia. P/E is 13.5 and PEG is 1.1, with a decent yield of 2.3%.

Grupo Televisa SA (TV) is the large television broadcaster in Mexico. Their programs are also rebroadcast in Latin America, Europe, Asia, Africa, the United States, Canada, and Australia. The P/E is 21.6 and the PEG is 1.3. The yield is a tiny .5%.

Cemex S.A.B. de C.V. (CX), or just Cemex, is the largest cement company in Mexico and the third largest cement company in the world. They have production facilities in 50 countries all over the world including North America, the Caribbean, South America, Europe, Asia, and Africa. P/E is 10.3 and the PEG is 2.6. Yield is 1.9%.

Fomento Econmico Mexicano, S.A.B de C.V (FMX), also known as FEMSA, is the largest beverage company in Mexico, and for that matter, all of Latin America. P/E os 21.3 and the PEG is 1.1 with a yield of 1.1%.

Finally, there is Gruma SA de CV (GMK), is the largest manufacturer of corn flour and tortillas in the world. They are also the largest manufacturer of corn chip in Mexico. P/E is 11.5 and the PEG is 1.6. They pay a nice yield of 2.4%.

Author does not own any of the above.

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