Like pocket-billiard wizards, some investors like to use the
The indirect stock play will sometimes get you exposure
earlier and safer than a direct play.
Consider a couple of facts recently reported in IBD. On Aug.
that China lost its factory wage advantage to Mexico earlier this
year. The article pointed out that companies are now "re-shoring"
production to Mexico.
Then on Tuesday, the
International Leaders column
discussed the Next 11 fast-growth countries, which include
Mexico's GDP growth was 3.8% last year vs. 1.7% in the U.S.,
according to the CIA World Factbook.
You might say you don't want to invest your money in Mexico.
Certainly, there are drawbacks, such as red tape and
However, here's where the bank shot off the far rail comes in
handy:Kansas City Southern (
The U.S.-based railroad provides a unique play on Mexico.
Kansas City's rail lines run from the Midwest and Southeast into
In the second quarter, Mexico accounted for 46% of K.C.'s
revenue, and the U.S. the rest.
Kansas City Southern's customers span a wide range of
industries, including electric utilities, chemicals, petroleum,
agriculture, minerals, cars and consumer products.
Earnings grew 20% in Q2, and after-tax margin was 17%, the
best in at least 18 quarters. Revenue, though, rose only 2% --
the smallest gain in 10 quarters.
What happened on the revenue side?
Weakness in the Mexican peso vs. the U.S. dollar was part of
the problem. Utility coal carloads also were weaker than
Yet the Mexico angle remains strong. Cross-border intermodal
carloads increased on a year-ago basis by 56% in 2011, 78% in Q1
and 106% in Q2. CEO David Starling is bullish on the Mexico
opportunity. He said at the July 17 earnings call that Mexico
offers "the very beginning of what promises to be many years of
Kansas City Southern's annualized dividend yield is 1%.
The company suspended the payment of dividends in 2000, but
restarted them in 2011.