This page is temporarily not available. Please check later as it should be available shortly. If you have any questions, please email customer support at firstname.lastname@example.org or call 800-767-3771 ext. 9339.
With the global stock markets in chaos, suddenly there are investing opportunities for those with some guts.
The BRICs get all the love. Investors love to talk about their Chinese stocks or what is going on in India or Russia. Brazil has the big emerging middle class and immense natural resources. Yet other emerging market countries, and their companies, get brushed aside.
One country that should be on the "watch" list of every investor right now is Colombia.
Cruise Ships Return
After a decades long drug war that ravaged the country and scared investors (and tourists) away, the country has since stabilized. Since 2002, the number of multinational companies doing business in Colombia has doubled. Once again, cruise ships are docking in Cartagena.
The IMF is also bullish on Latin American growth. It averaged 6% in 2010 and, like the rest of the world, is expected to moderate in 2012. But the IMF still expects Latin American growth of 4% which is better than the slow pace that Europe and the United States are expected to do.
Still, for older investors, it's hard to separate Colombia from the images of the car bombs and drug kingpins.
Just how much has changed in the country?
The House Hunters Indicator
House Hunters International, HGTV's popular house hunting show, recently had an episode with two 20-something Canadian guys who traded in the Vancouver life for that of affordable high rise living in the beautiful city of Medellin. My how much has changed in just 10 years.
But if those two condo buyers were any indication, as they looked at units with sleek stainless steel appliances and rooftop pools, the middle class is certainly emerging in a big way in Colombia.
Because there was little indication in the episode that these city high rises, of which there were many, were being built only for Canadian or European home buyers. Far from it. The Canadian buyers in the episode were living amongst the Colombian locals.
How To Buy Into Colombia's Growth
As an investor, it can be difficult to "play" the smaller emerging market growth stories. Compared to the BRICs, there are far fewer Colombian companies that trade on the American stock exchanges. Their companies aren't mature enough yet.
But never fear. There are still opportunities available for those who dig a bit deeper.
3 Ways To Buy Colombia Right Now
1. Buy Colombian Companies
While there isn't as much choice as buying a Brazilian or Chinese company, there are still some Colombian companies that trade directly on US exchanges.
It also does business in El Salvador. You may not be familiar with it, but it is not small with a market cap of $47 billion.
It has an impressive ROE track record, averaging 19% over the past 8 years, which is very solid for a bank especially during a global recession. Its current ROE is 21% well above its peers at 15%.
Bancolombia is expected to grow earnings over the next two years by 9.8% and 17%, respectively. This Zacks #2 Rank (buy) has a P/E of 14.8. It also pays a decent dividend of 2.3% which it did not cut during the global crisis.
Shares haven't been nearly as weak as US and European banks as it is somewhat insulated from the Eurozone problems. But a sell off would make shares an even more attractive buy.
2. Buy Global Companies Doing Business in Colombia
Investors aren't the only ones who see opportunities in Colombia. Many multinationals have moved in and are expanding operations in the country.
Copa Holdings S.A. ( CPA - Snapshot Report ) is a low cost airline headquartered in Panama City. It services 59 destinations in 25 countries and flies to all the major airports in Colombia including Cartagena, Medellin and Bogota.
The company is well positioned to benefit from the growing Latin American middle class. Earnings are expected to grow about 27% in 2011 which is strong growth for an airline.
Yet Copa also has excellent valuations with a forward P/E of just 10.7. This Zacks #2 Rank (buy) also pays a dividend, yielding a solid 2.3%.
PriceSmart, Inc. ( PSMT - Snapshot Report ) is a San Diego-based retailer which operates 29 warehouse clubs in the Caribbean and Latin America. On Aug 19, it opened its first club in Barranquilla, Colombia.
It has experience operating in the region, as it already has 4 clubs in nearby Panama. Some analysts believe Colombia could be one of its largest markets.
This Zacks #1 Rank (strong buy) is not cheap. It is trading at 27x forward estimates as the stock has recently soared to multi-year highs.
But it does have earnings growth, which is expected to be 29% in 2011. It also pays a dividend, which is rare for a retailer of its size, which currently yields 0.8%.
3. Buy a Colombian ETF
The investment world is figuring out that Colombia is hot. In the last several years, a couple of Colombia specific ETFs have been launched. The Global X FTSE Colombia 20 ( GXG - ETF report ) is the most heavily traded of the ETFs. It is an index of the 20 most liquid stocks in the Colombian market.
Its largest holding as of June 30, 2011 is, not surprisingly, Bancolombia at 13.9% of the index. Banks make up 21.2%, Financial Services are 20%, Oil & Gas are 17.1% and Industrials are 10.7% of the index.
The ETFs can be a good way to get a broad base of exposure and to buy companies that otherwise would not be available because the company isn't traded on a US or European exchange.
Make a Bet on the Future
Even as the global economy seems to be slowing, some countries like Colombia find themselves with plenty of natural resources, an emerging middle class, and stable lending institutions. Now's the time to consider taking a chance on Latin American growth.
Please login to Zacks.com or register to post a comment.