Many emerging markets have had a rough 2013. Outflows from
developing nations have been a serious problem as weak currencies
and a desire for more U.S. exposure have led to huge losses.
While the focus of this selling pressure has largely been on big
Asian markets like India or Indonesia, Latin America hasn't been
immune either. This region has also struggled over the past six
months, as commodity prices have been somewhat sluggish overall,
and a risk-off trade in these nations hasn't helped matters.
Although Brazil usually leads the way in this regard, investors
should be aware of Colombia too. The nation had been a star
performer for quite a while, but it has fallen on hard times
lately. Plus, a program by the central bank to weaken the
peso-which arguably helps exporters-doesn't exactly have a positive
impact for U.S. investors in the meantime.
Thanks to these factors, the once-star performer of
is probably a stock that you want to avoid for the time being.
Bancolombia in Focus
Bancolombia is the largest commercial bank in Colombia, offering a
full range of financial products. The firm is based in Medellin and
it has nearly 1,000 offices, though its network stretches to other
Latin American countries, and the U.S. and Spain as well.
CIB surged in the aftermath of the financial crisis as demand for
emerging markets were strong, as prices moved from under $20 a
share in 2009, to over $60 in mid-2010. Lately however, prices hit
just above the $70/share mark and have had trouble maintaining that
lofty level ever since. In fact, CIB's shares have declined by
15.6% YTD, including an 8.7% slump in the past six months.
Factors for the slump
In addition to the macro issues, the estimates picture for CIB has
been quite unfavorable as well. The company has seen the consensus
estimate slump over the past two months, plunging from $4.66/share
to its current level around $3.99/share.
Growth levels are also quite poor for the company, with a -10.66%
earnings contraction expected for the full year. If that wasn't
enough, growth over the next five year is expected to come in below
the industry average, and in the high single digit percentage
While such a level might be tolerable in a developed country, CIB
is in an emerging market with a growing population, so it is
questionable why the growth is so low for this company. And CIB is
also looking quite poor for this earnings season too; the company
just had a horrendous miss in their most recent report, while the
Zacks Earnings ESP comes in negative, suggesting that another miss
may be around the corner for this Colombian bank.
Thanks to these factors, CIB has earned itself a Zacks Rank #5
(Strong Sell), meaning that it is likely to underperform in the
weeks ahead. And with a Zacks Recommendation of underperform, the
longer term picture isn't looking much better.
While the foreign bank industry might not have that great of a
Zacks Industry Rank-bottom 50%-- there are a couple top ranked
companies that may be better picks than CIB. These include
All three of these companies have a top Zacks Rank #1, and thus may
be better choices in the foreign banking world. Best of all, the
trio has seen their ranks surge in the past week to the #1 level,
suggesting that now is the perfect time to focus on these instead
of the likely-to-underperform CIB.
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