"I wish I had invested in China before it slowed down," an
investor says in frustration.
I hear this all the time.
And it's not just China. You could plug in any security that's
grown exponentially in a short period of time and I've heard
someone complain about missing it. Too many investors get caught
looking at growth in the rear-view mirror.
But rather than chasing after played-out growth stories, I
think I've pinpointed a country that's just starting its growth
And it's sitting right under your nose.
Like China, this country is quickly becoming a manufacturing
powerhouse. But it's not too late to beat the crowd (and themoney
) byinvesting in it today.
You'll likely think I'm talking about Brazil or India -- but
In fact, when I tell you what country it is, you may think
this is one of the last countries where you'd want toput your
And that's where you'd be wrong.
Renowned economists have taken notice, and financial firms
like JP Morgan are already looking for ways to invest here. But
you can invest here before the herd starts to drive up prices and
lock in a 9%yield in the process.
So which country am I talking about?
Just the other day, Pulitzer Prize-winning New York Times
columnist Thomas Friedman said this countrywill be one of the
"dominant economic power[s] in the 21st century."
If you guessed the country is Mexico, then you're right...
- In 2009, Mexico overtook South Korea and China as the
world's leading producer of flatscreen TVs. It's also the No. 1
producer of two-door refrigerators.
- In 2010, Mexico exported $4.3 billion in aircraft and parts
for the aerospace sector, and it's expected to boost those
exports 179% to $12 billion by 2020.
- In 2012, the country manufactured 2.88 million cars (12.8%
more than the year before), and Researcher LMC Automotive
projects it will bump up production by another 31.9% within
just four years.
And despite having a population that makes up just one-fifth
of all Latin America, The Financial Times reported the country
exports more manufactured products than the rest of Latin America
There are two things almost everyone knows about Mexico: 1)
Mexico has a problem with drug-related violence, and 2) Over the
years, a large number of Mexicans have immigrated -- legally and
illegally -- to the United States.
But if that's all you focus on, then you will miss out on one
of the world's most dynamic manufacturing transformations, not to
mention a greatinvestment opportunity.
For starters, the country has become a hotbed for
international trade. Mexico has signed 44 free trade agreements
-- twice as many as China, four times more than Brazil and more
than any other country in the world.
Mexico has also ramped up the number of engineers and other
skilled workers graduating from its schools -- creating a smarter
and more nimble labor force.
This burgeoning labor force is even giving China a run for its
Not long ago, China was the global manufacturer of choice,
thanks to the country's low wages and vast workforce. In fact, in
the early 2000s many manufacturers fled Mexico to take advantage
of low wages and set up operations in China.
Butinflation has pushed Chinese wages higher. Now, the average
worker in Mexico gets paid about the same as a Chinese
And that has manufacturers moving back to Mexico at a record
, for example, is building another plant in Mexico that will
essentially double its production of cars there by 2016.
Volkswagen's Audi unit will open the first luxury-brand auto
plant in Mexico in 2016. Nissan is spending roughly $2 billion to
build its third plant in Mexico, scheduled to start production by
the end of this year.
Mexico has been grabbing a larger share of imports into the
United States. In 2005, 11% of manufactured imports came from
Mexico. By the first half of 2012, that share jumped to 14.2%.
The U.S. Department ofCommerce projects that Mexico's share will
increase to 16% by 2018.
With all the good news about Mexico's bustling manufacturing
sector, I'm not surprised that Mexico's gross domestic product
grew a healthy 3.9% last year -- more than twice as fast as the
Here's how I'm profiting from Mexico's transformation right
One of the best plays on the Mexicaneconomy is the
The MexicoFund (
, a well-rounded fund that pays a soliddividend .
This is a diverse fund that has plenty of exposure to
financials, health care, media, transportation and mining
companies within the booming Mexican economy -- all of which
should benefit from a growing middle class driven by the
The Mexico Fund holds a number of Mexican subsidiaries of U.S.
consumer companies. For instance, you'll findshares of
Kimberly-Clark de Mexico,
Coca-Cola FEMSA (
and Wal-Mart de Mexico.
America Movil (
, the fourth-largest mobile telecommunications provider in the
world, make up more than 10% of the fund. The fund's
second-largest holding (7.7%) is
Fomento Economico Mexicano (FEMSA) (
, theparent company of Coca-Cola FEMSA and operator of OXXO, the
fastest-growing convenience store chain in Mexico.
The Mexico Fund's generous dividend has made it an attractive
security for income investors. But its good dividend is about to
get even better.
The fund currently pays a quarterly dividend of almost 63
cents per share. At current prices, itsdividend yield is a hefty
But thanks to the growth in the fund'snet asset value at the
end of 2012, the dividend is about to increase to roughly 77
cents per share every quarter, giving it a forward yield of 9%
based on today's prices.
And that should definitely grab the attention of yield-hungry
Mexico's risks are known. In fact, its risks are all that most
investors see. Many people may have been surprised by Friedman's
New York Times column, but my readers weren't.
Action to Take -->
I first touted The Mexico Fund in my
newsletter in June 2010 and again in December 2012. The fund has
already produced an 87% total return in my real-money portfolio
and is on my "Buy First" list. I think the great Mexican
manufacturing transformation is still in its infancy and The
Mexico Fund has plenty of room to run.