Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



The Emerging Market You Can't Afford to Miss

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Emerging markets offer investors growth opportunities that are often at value-oriented prices. You can swoop up a quickly growing company for much less than its U.S. counterpart because the market prices in added risk, often for good reason. In the past year or two, investors have been wary of many emerging markets, such as China, because of the extreme volatility in stock prices and the increased occurrences of fraud. What many investors do not yet realize, though, is that one of the strongest emerging markets in the world is just south of our border.

Like Brazil, but less Favela-y
Brazil and Argentina are the oft-mentioned emerging markets in Latin America. While the United States was enduring its "Lost Decade," Brazil was showing stunning GDP growth that seemed more organic than China's state-run growth campaigns, but still involved a great deal of government muscle. So as Brazilian industry and agriculture have slowed, and Argentina's growth has leveled off, Mexico has made impressive leaps into the forefront of the emerging Latin nations. Despite an incredible amount of drug-related violence and corruption, the Mexican GDP outpaced Brazil's in 2011 and is set to do it again in 2012, at 3.6% growth versus Brazil's 2.18%.

So what music is leading this dance? For one thing, Mexican manufacturing facilities are producing record amounts of electronics such as televisions and computers. Auto manufacturers have also flocked to the region for its low-cost labor (a controversial issue for human-rights organizations) and proximity to the United States. In fact, three of the big Japanese automakers are set to open new plants in Mexico over the next couple of years.

While the sudden idea of a booming Mexican economy may sound random, the Mexican government is eager to point out that this is not a surprise. At the G-20 summit, held in Los Cabos, Mexico, the country's leaders have pointed to almost two decades of stable macroeconomic growth, low inflation rates, and a very reasonable debt situation.

Luckily for investors, the market hasn't totally taken hold of the opportunities in Mexico, as it did with Brazil.

A familiar face abroad
Beverage kingpin Coca-Cola (NYSE: KO  ) has been a Warren Buffett favorite for decades and has been one of the best-performing stocks over as much time. As you probably know, Coke deals with a network of producers, bottlers, and distributors in addition to its own system to get its products around the world. Arca Continental (NASDAQOTH: EMBVF.PK) is a member of this incredibly profitable network. Arca is the second largest bottler of Coke products in Latin America and is darn good at it.

Last quarter, the company saw net sales rise by more than 70% from the prior year's quarter. The company trades at a little under 11 times EV/EBITDA. The EV-EBITDA ratio is a less used but, in my opinion, better valuation metric for looking at what an owner of the company takes away -- mainly because it includes debt obligations and free cash flow. Compared with its peers, and with Coke for that matter, Arca is a few points below average and looks to be a good buy based on its fast-growing business.

Cement this into your portfolio
The biggest cement company in the world is Cemex (NYSE: CX  ) . Though revenues have fallen for three years straight, causing the stock price to follow suit, Cemex is an interesting value play. The company is currently trading around 0.66 price-to-book. This means that investors are essentially buying the company for a little less than $0.70 on the dollar. A price-to-book below 1 for a company like this indicates that the market is expecting sales to continue to decline. The company doesn't forecast big growth, but it does see around a 2% pickup in revenues for 2012. In addition, there is sufficient evidence that the Mexican housing market will pick up along with U.S. housing, which would obviously increase demand for the largest cementer around.

The company screwed up by buying Australian cement company Rinker in 2006. It was a problem because of poor market timing (a year before the global collapse) and because it overpaid for the sake of growth. The depressed stock price reflects this poor decision, though I believe the company can move on from its $16 billion "oopsie" and focus on increasing profitability in its core operations.

"Corona," Mexican for "beer"
Multinational corporations have taken interest in Mexico as well. Last week, beer giant Anheuser Busch InBev (NYSE: BUD  ) purchased Grupo Modelo (NASDAQOTH: GPMCY.PK) for a little more than $20 billion. Grupo Modelo produces the best-known Mexican beer brands, with Corona as its leading product. First-quarter profit for Grupo Modelo was up to $176 million, based on improving economics in the U.S. and abroad.

Belgium-based AB InBev is expected to have sales of nearly $50 billion this year.

Mexican standoff
As with many emerging markets, there are some macro issues to keep an eye on before making any investment decisions. Mexico has long been prone to political strife in the form of corruption and coups. Though recent elections seemed to go well, the political landscape can change quickly.

Investor sentiment toward Mexico, regardless of company specifics, can wax and wane with the massive drug war ongoing in the country. Drug-related violence continues to deter tourists, as well as some foreign investment, though one can get around this issue by investing in companies that have international exposure and can transcend the difficulties taking place within the nation's borders.

If the political uncertainty is enough to keep you away from any Mexican companies, there are other great opportunities in Latin America for the prudent investor. Our analysts have identified a company that looks a lot like market darling Costco but is much younger and just now shifting into high gear. You can read the free report.

Fool contributor Michael Lewis owns none of the stocks mentioned in the story above. You can follow him on Twitter, @MikeyLewy. The Motley Fool owns shares of Coca-Cola and Costco Wholesale. Motley Fool newsletter services have recommended buying shares of Coca-Cola and Costco Wholesale. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1931317, ~/Articles/ArticleHandler.aspx, 5/30/2016 5:04:28 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 17,873.22 44.93 0.25%
S&P 500 2,099.06 8.96 0.43%
NASD 4,933.51 31.74 0.65%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

5/27/2016 4:02 PM
BUD $126.29 Down -0.88 -0.69%
Anheuser-Busch InB… CAPS Rating: ****
CX $6.49 Down -0.08 -1.22%
Cemex CAPS Rating: ***
KO $44.78 Up +0.09 +0.20%
Coca-Cola CAPS Rating: ****