Noted for their simplicity and other advantages over mutual funds, exchange-traded funds have become a popular investing tool. ETFs hold a collection of stocks that share certain elements in common; if investors want to capitalize on the booming sectors of the Mexican economy, for example, they can turn to iShares MSCI Mexico Index (NYSE: EWW), which contains Mexican stocks covering industries including industrial materials, financial services, and telecommunications.
But since this ETF invests in a number of stocks, it gives you a broad diversity that also limits your upside. For an investor who was, say, really hip to Mexican airport operators, but cold on the future prospects of Spanish media stocks, this ETF wouldn't fit the bill.
Fear not, amigo. In this edition of "ETF Teardown," we'll use some nifty tools to drill into the best of what Mexico has to offer. To help, we'll use Motley Fool CAPS, our tool for screening and ranking stocks and stock pickers.
The power of tags
To help investors quickly locate great stocks, any of the 5,000 rated stocks profiled in CAPS can be "tagged" with a descriptor that groups the company with others sharing a certain quality.
Selecting the "Mexico" tag in CAPS presents a list of more than 23 Mexican investments trading on American exchanges. This particular collection of investments has done well in the past year, up 36.2% versus the S&P gain of only 15.4%.
To get a sense of which companies the CAPS community considers the best opportunities in Mexico today, we can sort this list by CAPS star rank, from one to a maximum five stars. For each of the individual companies, we can then see exactly who -- from Wall Street to Main Street -- is bullish or bearish on the company and why.
Getting down to the nitty-gritty
Here are a few of the stocks our screen pulled up today:
|
Company
|
CAPS Rank
|
|
Grupo Aeroportuario Centro Norte (Nasdaq: OMAB)
|
*****
|
|
Grupo Aeroportuario Del Sureste (NYSE: ASR)
|
*****
|
|
Grupo TMM
|
****
|
|
Grupo Televisa (NYSE: TV)
|
****
|
|
Grupo Aeroportuario del Pacifico (NYSE: PAC)
|
****
|
|
Grupo Simec
|
***
|
Even those who don't know Spanish from Swahili might notice three companies with something in common on our list. (Hint: aeroportuario.) Turns out we have three airport operators on our list of Mexican stocks, each operating a number of airfields in different regions of Mexico.
Grupo Aeroportuario Centro Norte (or OMA for short) operates airports in popular destinations in the central and northern parts of Mexico, such as Monterrey, Mazatlan and Acapulco. The other two groups similarly operate airports in the southeastern (Sureste) and Pacific (Pacifico) regions of the country. While each focuses on different geographic areas, many of the same forces are driving each stock -- one of which is the increase in domestic travel, thanks to lower-cost carriers moving into Mexico. With a strong economy in the U.S. and other regions, international travel is also a significant component of revenue, since airlines such as AMR's (NYSE: AMR) American and UAL Group's (Nasdaq: UAUA) United routinely fly to Mexico.
Passenger traffic at OMA has been strong. The company enjoyed a 27.1% increase overall in August, with domestic travel leading the gains. And while international traffic has been waning lately, CAPS investors are overwhelmingly bullish on the company's prospects, with a near-unanimous 114 out of 115 investors voting that the shares will beat the market in the future.
It may also be obvious what a company with the ticker "TV" does as well, but Grupo Televisa goes beyond television programming, offering other types of media and entertainment such as radio and print publications. The company holds a dominant position in the market for Spanish-language media, and while the stock has a few more detractors in CAPS than OMA, more than 95% of investors rating the company believe it will beat the market going forward.
You can lead a horse to water...
Plucking individual stocks from an emerging market such as Mexico is a risky endeavor, of course. Investors should always perform their own due diligence on companies, rather than taking any recommendation at face value. After all, even the best stock pickers can be horribly wrong on a stock.
Do you agree that airports are still the best place to be in Mexico? Or are media companies a better play? Share your own opinion in Motley Fool CAPS.
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