With growth rates nonexistent in the United States and expectations for future growth muted due to ongoing debt levels and credit problems, investors have turned to other regions of the world to boost their portfolios.
China and the Asian Tiger countries have long been popular destinations to diversify portfolios.
But countries south of the border have also seen an emerging middle class and sometimes are overlooked on the world stage.
Buy Individual Companies or Buy a Basket
There are two ways to invest in Latin America: through individual companies that trade on the American exchanges or through a basket of companies in an exchange traded fund (ETF).
If you want to take the no hassle approach there are several ETFs available to capture the Latin American market.
You can buy a basket of companies from many countries in the iShares Latin America 40 ETF (ILF). Or you can buy individual countries such as with the popular iShares Brazil (EWZ), iShares Mexico (EWW), or iShares Chile (ECH).
But a more interesting investment opportunity, with the possibility of bigger returns, lies in buying the individual companies.
Finding Latin America Companies
You might be confused as to where to even begin in finding individual companies. But one shortcut is to look at the holdings in the ETFs. Financial sites such as Yahoo Finance list the top 10 holdings in ETFs.
These will be the largest holdings and usually are large cap companies with a long earnings history. But this is a good place to start.
Using this method, I easily discovered several companies with well-known name brands.
Companhia de Bebidas Das Americas (otherwise known as AmBev) (ABV) is the world’s 5th largest brewer and one of the largest in Latin America. Based in Brazil, it distributes beer, soft drinks and other non-alcoholic beverages in the Americas. It also is PepsiCo’s largest bottler outside of the United States.
AmBev trades with a forward P/E of 14.8 and has an outstanding 1-year return on equity (ROE) of 29.73%.
Read the Zacks Analyst Research Report from May 8, 2009.
Petrobras (PBR) is a large Brazilian-based integrated oil company. It has more than 100 production platforms, 16 refineries and 6,000 gas stations.
Recently, the company announced a huge find in the giant Tupi oil field off the coast of Brazil which would rank the country ninth in oil reserves in the world.
The company is trading with a forward P/E of 17 and has a 1-year return on equity (ROE) of 24.01%.
Read the Zacks Analyst Research Report from June 10, 2009.
Coca-Cola FEMSA S.A. de C.V. (KOF) produces and distributes Coca-Cola products in nine Latin American countries. Headquartered in Mexico, the company is the second largest Coca-Cola bottler in the world by volume.
It accounts for 10% of Coca-Cola sales in the world and 40% in Latin America. Despite challenges including the global recession and the swine flu outbreak in Mexico, Coca-Cola FEMSA is benefiting from its strong brand.
The company is trading at just 13.6x forward estimates. It also pays a dividend, with a current yield of 1.24%.
Read the Zacks Analyst Research Report from May 5, 2009.
Expand Your Horizons South of the Border
These are just a few of the options investors have in expanding their portfolios to include Latin American exposure. In today’s global economy, investors will find there can be faster growth and opportunities outside of the United States.
It pays to look.
Ways to Search for ADRs
Research Wizard – This sophisticated tool will allow you to search for a detailed list of companies that trade as ADRs.
