Say Ole! on the Fifth of May

Many of us in the U.S. think Cinco de Mayo is a day to squeeze lime into your beer, eat something spicy, and say "Hola!" to everyone you meet. 

Others mistake the holiday for Mexican Independence Day, which it's not. Cinco de Mayo celebrates an 1862 victory over the French in the Battle of Puebla. Even 146 years later, Mexico is still showing the world its strength and resilience, but this time using pesos in place of pistolas.

Mexico's economy has been absolutely en fuego, and investors in the iShares MSCI Mexico Index (NYSE: EWW  ) have enjoyed an annualized gain of 17% over the past 10 years. In the past year, however, this ETF's chart has gone horizontal, so I'm turning to the collective wisdom of the Motley Fool CAPS community for its perspective on whether further gains are irons in the fire for Mexico's hottest stocks.

Categories of stocks in the CAPS database are very easy to search using tags, and the Mexico tag contains 24 listings. Of these, 14 have received the highest possible rating by CAPS players, earning cinco stars. Let's take a look at a few of these picks.

Company

P/E Ratio

Dividend Yield

% Below
52-week High

America Movil S.A. (NYSE:AMX)

18.4

4.00%

16.3%

Cemex (NYSE:CX)

8.3

2.70%

32.3%

Grupo Televisa (NYSE:TV)

N/M

0.60%

16.6%

Grupo Aeroportuario del Centro Norte (NASDAQ:OMAB)

505.8

3.80%

30.8%

Fomento Economico Mexicano (NYSE:FMX)

18.7

1.10%

6.0%

Data from Yahoo Finance as of May 5. N/M = not meaningful.

Reach out and touch someone
America Movil, which comprises 25% of holdings in the Mexico ETF, is the most beloved of Mexican companies within CAPS. Of the All-Star players, 594 expect shares to outperform the S&P 500, and only four take the dissenting view. After delighting shareholders with an 917% return over the past five years, the stock's popularity comes as no surprise.

Top-rated CAPS All-Star Madmykl, who has a rating of 99.82, had nothing but praise for the telecom giant. He wrote this bullish pitch a week after last year's Cinco de Mayo:

[America Movil] is a HUGE Mexican company, owned by the second richest guy in the world. Its day-to-day operations are already run by his sons, however, so if something happened to him the show would go on. ... A 5-fold increase over the next 5 years would not surprise me in the least. So here it is ... a safe, large company, growing in a fast but sustainable manner, the owner has billions of his own dollars in the company, and its priced about half of what your average ho-hum 30% growth company should be. Good stuff.

Like a rock
Although down more than 30% from the 52-week high, shares of cement maker Cemex have exhibited resilience in the face of a building downturn in the U.S. and the nationalization of its Venezuelan assets by Hugo Chavez.

CAPS player Bruce1967, one of CAPS' "most helpful" pitchers, saw deep value in Cemex shares early this year:

Over the last 5 years, book value has grown at an annual rate of about 17 percent and Valueline figures it should continue to grow at about 13 percent. If this all pans out, and you buy the shares at $25, your investment should grow at about 13 percent for the next five years. Add in a 3% annual dividend and you're looking at a pretty decent return of 15 to 16%. Sometime in the next 5 years, If Mr. Market returns to a more optimistic state of mind, he might offer to buy your shares for 1.5 times book, in which case your return would jump to about 24%. At that rate you would double your money in about 3 years. Warren would be so proud of us!

The shares haven't risen that much since then. Fool contributor David Lee Smith agrees and recently encouraged Fools to load up on Cemex shares.

Whether you're considering a single company or a basket of shares through the ETF, there's no denying the growth story that lies just south of the border. With the overwhelming majority of CAPS players lining up behind these companies, I like the odds for continued growth going forward. Ole!

If you like the idea of a free online community where investors help each other identify great stocks and exchange ideas, then come on in and join the fun!

Cemex is both a Stock Advisor and Global Gains recommendation, and The Motley Fool owns shares. Grupo Aeroportuario Centro Norte is also a Global Gains pick. For more international investing ideas, try it free for 30 days.

Fool contributor Christopher Barker captains yachts and writes about stocks. He can also be found acting foolishly within the CAPS community under the username Sinchiruna. He owns no shares in the companies mentioned. The Motley Fool has a disclosure policy.


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