Chinese and Indian stocks? They're so 2006.
That's the prevailing opinion among the more than 100,000 investors participating in Motley Fool CAPS, the Fool's free investor-intelligence community.
These days, many investors want to tap the growth potential of South American stocks. In fact, eight of the top-100 rated stocks in the CAPS universe hail from Argentina, Chile, or Brazil.
A new hope
While many global markets have fallen this year, the South American markets have held up relatively well. As of April 30, Brazil's and Chile's markets were up 11.2% and 7.6%, respectively, year-to-date, in dollar terms. Chemical & Mining Co. of Chile
Where will the next big winner come from? Here are this month's top five South American stocks right now, all of which, like SQM and Vivo, carry CAPS' maximum five-star rating.
Company |
Country |
Industry |
---|---|---|
iShares S&P Latin America 40 Index |
South America -- General |
ETF |
Companhia Paranaense de Energia |
Brazil |
Electric utilities |
Telmig Celular Participacoes |
Brazil |
Telecommunications |
Companhia de Saneamento Basico |
Brazil |
Water/sewage utilities |
Telecom Argentina |
Argentina |
Telecommunications |
Please bear in mind that these stocks are not formal recommendations. Instead, they're offered as jumping-off points for further research. Researching five-star CAPS stocks has proved to be an effective tool for investors.
Look before you cross the street
Regional exchange-traded funds like the iShares S&P Latin America 40 Index have grown in popularity in recent years, both as a way to diversify and to make bets on regional growth. But not all regional ETFs do what you think they may. For instance, one might think that with oil prices being high, the SPDR S&P Emerging Middle East & Africa ETF is a good place to be because of the oil-rich countries in the region. But in fact, this fund has more than 75% of its assets invested in Israel and South Africa and only about 6% in energy stocks. Probably not what you had in mind.
So does this Latin American fund live up to its name? Sort of. Here are the regional breakdowns:
Country |
% of Assets |
---|---|
Brazil |
63.4% |
Mexico |
27.0% |
Chile |
6.6% |
Luxembourg |
2.4% |
Argentina |
0.2% |
A few things stand out here. For one ... is that Luxembourg? Isn't that in Europe? For whatever reason, the ETF holds shares of Luxembourg-based steel and iron company Tenaris
Besides that anomaly, Argentina doesn't seem to get enough coverage in the ETF. And that's a shame. Argentina has the 25th largest economy in the world, yet it makes up only 0.2% of this Latin American fund's assets. Sure, it may not be as important as Brazil or Mexico to this region's economy, but it's certainly more important, not to mention more relevant, than Luxembourg.
Nevertheless, CAPS investors think this ETF is the cat's meow. Of the 516 players who have rated the stock, 507 of them think it will outperform the S&P 500 going forward. One of those bulls is Ayn Rand fan club member HoweirdRoark, who wrote last October that it was time to join the Latin American economic renaissance:
Extraordinary growth in Latin America the last 5 years, and this region will continue to grow for years to come. Economy is stabilizing, Political situations are stabilizing; these areas are embracing capitalism and becoming more developed with every passing day. Take advantage now, because the greatest growth potential is no longer in the U.S. -- developing and emerging economies are where it's at.
This is a fund to consider if you're particularly bullish on the Brazilian economy and want exposure to names such as Vale
You can see what other CAPS investors have to say about the iShares S&P Latin America 40 Index, or any stock for that matter, by joining CAPS today. After you've read their opinions, be sure to voice your own!