Imagine a country with 3.8% gross domestic product expansion
in 2012, annual average corporateearnings growth of 14%, low
labor costs and the geographic position to crush China in exports
to the United States.
That almost seems like aninvestment from Shangri-la,
Still, many Americans dismiss this nation's
potentialinvestments as too risky. They think of the nation's
vast poverty, government corruption and sketchy infrastructure
rather than its thrivingeconomy . Complementing the impressive
growth, this emergingmarket possesses beautiful beaches,
near-perfect weather, great food and incredible resorts.
If you haven't guessed it, I'm talking about our southern
neighbor Mexico, the misunderstood yet dynamic investment
And I'm not the only one who thinks Mexico is a great place to
invest. Amy Calistri, chief investment strategist of
, says one of the best plays on the thriving Mexican economy is
The MexicoFund (
, which yields about a 7% and has provided her with an
astounding 87%-plus total return since June 2010.
And there's more to this story...
MXF is a diversified fund that is invested in financials,
health care, media, transportation and mining companies in
Mexico. In other words, it's exposed to nearly all of Mexico's
thriving sectors. This clearly reflects and verifies the massive
growth of this once backwater nation.
Believe it or not, Mexico is the world's No. 1 producer of
flat-screen TVs and a major exporter of aircraft and aviation
parts. It is even a player in auto manufacturing, having produced
nearly 3 million automobiles in 2012.
A boon to its economic growth is the country's 44 free-trade
agreements, the most of any nation on Earth. As you know, free
trade is the only time-proven technique for long-term economic
Noted New York Times journalist and trend watcher Thomas
Friedman has said he believes Mexicowill be "one of the dominant
economic powers in the 21st century." A primary reason why
Friedman says that: Mexico has been rapidly increasing its
exports to the United States. In 2005, Mexico was responsible for
11% of all manufactured imports to the United States; by the
first half of 2012, this number had climbed to more than 14%. The
U.S. Department ofCommerce says this number could leap to 16% in
Talk about a success story.
While there is little question that MXF provides a solid,
long-terminvesting opportunity, I like the
iShares MSCI MexicoETF (
as a way to capture Mexican growth. This ETF rose 22% in the past
year and has 38% of its assets in consumer-orientedstocks . It
takes advantage of the growing Mexican middle class -- millions
of formerly poverty-stricken Mexican citizens are rising up the
class ladder thanks to the growth in manufacturing jobs. These
workers are spending their new-found wealth in chain stores and
Fomento Economico Mexicano (
, a chain of convenience stores and controller of the largest
bottler in the world, and
Wal-Mart de Mexico (
, are the ETF's top holdings.
In addition, the ETF holds no energy assets, a good thing
because most of the nation's energy supplies are controlled by
I really like the technical picture of EWW right now. The
price has pulled back into the value "buy" zone due to
expectations of sluggish first-quarter growth by Mexican
officials. This pullback is a buying opportunity that is not yet
evident in MXF.
Risks to Consider:
Mexico is "risk city" to say the least, due in part to
rampant corruption and bad guy politicians. However, things are
improving as the masses find legitimate ways to earn a living.
With this inherentpolitical risk comes high reward.
Action to Take -->
Investors wanting to take advantage of the long-term growth of
Mexico should consider MXF and EWW. However, right now, EWW looks
better technically because of a recent pullback. I would not be
surprised to see it at $95 and MXF at $44 within 18 months.