ADR Traders

Today Financial News

What is your opinion and where should we put our money?
Juan: Krista, Volatility is not news in the stock market. I have been following local and International markets for more than 10 years and my recommendation always is: Invest in Latin American markets. Always include stocks or funds in your portfolio focusing on this region. During the last ten years many of the Latin American indexes have been outperforming other regions. And YES, many people have said that if the US economy catches a cold, Latin America will get pneumonia, but that is just a generalization.

Welcome to Smart Investing on Today's Financial News dot com. I'm Krista Das. The volatility of the market is putting a lot of pressure on investors to find safe havens for their money. The value of stocks of many US companies, especially in the financial sector, has fallen abruptly, while the prices of still more have been retreating over the last three months.

So, what should you do with your money? Well, its not all bad news. Today we would like to focus on what’s happening in international markets, specially the ADR markets (which are stock of foreign companies that trade on the US stock market). In this segment, we’ll focus on the Latin America 35 ADR Index. Joining me now is Juan Munoz (Muun-YOZ), Editor in Chief of a financial newsletter called ADRTRADERS dot COM. He also contributes to other financial publications in Spanish and has been invited to speak on CNN en Español as an expert in Latin American markets. Today he is going to share with us his take on some of the excellent opportunities available in the Latin American markets and the most profitable sectors in the region. Krista: Juan, welcome to the program. Thank you… Krista: Juan, Another exhausting week for Wall Street could be in store for investors, even as some see value among the wreckage wrought so far this year and anxious investors remain jumpy over prospects for the economy.

What is your opinion and where should we put our money?
Juan: Krista, Volatility is not news in the stock market. I have been following local and International markets for more than 10 years and my recommendation always is: Invest in Latin American markets. Always include stocks or funds in your portfolio focusing on this region. During the last ten years many of the Latin American indexes have been outperforming other regions. And YES, many people have said that if the US economy catches a cold, Latin America will get pneumonia, but that is just a generalization. If we look at the Latin America 35 ADR index, it is evident that these companies have performed above average for the region and for the sectors they represent, including mining, oil and gas, telecommunications, banking and others. During the last year, this Index increased by 75% from 275 points to almost 450. Krista: But, people will be more reluctant to invest outside of the country in a crisis situation. Juan: Actually taking some money out of the US is an excellent way of distributing your risk among other currencies and other economies.
Krista Let me give you some excellent examples of how it’s a great strategy now to consider including ADRs of companies located in Latin America or companies doing business heavily in Latin America in your investment portfolio.

Let’s start with Companhia Siderurgica Nacional ticket symbol (SID). This company is engaged in the manufacture, sale and export of steel and steel products. It is a totally integrated company, whose operations include mining, logistics, steelmaking and power generation. SID has flat steel production costs that are among the lowest in the world. It is also Brazil’s sole producer of tin-plate and retains more than 50% of the local galvanized steel market. In general, companies in the mining sector have been growing tremendously during the last two years. SID is also engaged in railroad transportation and electric power generation. The stock has been climbing during the last two years from US$30 to US$100.7 last month, approximately a 330% profit.
SID Net revenue was R$ 3.0 billion in the 3Q07, almost 14% up compared to the 3Q06 and EBITDA margin came to 44%. This is very significant and makes it one of the most efficient mining companies in Latin America.
Of course this doesn’t happen from one day to another. We have been following the mining sector in Latin America for a while and together with Australia and BHP (Billiton) companies in this sector offer some of the best investments opportunities. Krista, I said this last year and will continue to do so this year. Krista: you mentioned that not just Latin American companies are your focus, what other types of ADRs are you following? Juan: Well, there’s a Canadian mining company which is heavily invested in Latin America that I am also following since 2004. I am talking about Southern Copper symbol (PCU). This company had an appreciation of 170% over the last two years and it is part of our Newsletter recommendations. PCU is the world's largest publicly traded copper mining company. Also, they are the third largest copper smelting operation in the world. (PCU) is majority-owned, by Grupo Mexico who owns approximately 75% of their capital stock. Sales for 2007 reached a historic high of $6 billion, an increase of 11% over 2006. EBITDA also increased to $3.7 million, equivalent to 62% of net sales. Krista: would you continue investing in mining? Juan: Well, heavy demand in emerging markets such as China, India has tightened steel supplies and pushed up prices for suppliers worldwide. Also, steel coil sold at $670 per ton in Jan, up from $550 last year. Even if we have a strong recesion in the United States, steel will continue to be in demand in other countries for new construction. Also strong global economic activity and exceptional inventory controls in the U.S. will maintain a strong demand for steel.
Krista: Thank you very much for your time and I hope you’ll visit us again with more tips on international stock markets. Krista Das: If you would like to learn more from Juan, check out his trading research publication Su Inversion by clicking on this screen or go to Today’s Financial News dot com. That’s all for this week’s show. Until next time, here’s to great profits from Smart Investing.

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