Six Latin American Telecom Stocks To Consider

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The telecommunication market Latin America is set for excellent growth. With many countries in the region experiencing strong economic growth the penetration rate of mobile phones is especially set to go higher as the new middle class seek the modern necessities of life. In addition, new technology upgrades and the evolution of smartphones will drive growth in the coming years.

In an FT interview on June 12th, Carlos Slim, the telecom tycoon of Mexico said:

“Whether one should invest more in developed or emerging markets is a sterile debate,” he said. “What counts more is whether there are growth opportunities, not so much in the number of customers as in the applications they use.”

Mr Slim, who described Apple’s iPad and other tablet computers as “fantastic”, has until now focused primarily on the low end of the market, pioneering the high volume use of pay-as-you-go mobile phones.

But he said the best opportunities lay in the combination of the increasing purchasing power of Latin American families and ever-cheaper technology, such as smartphones, tablets, applications and content. He said he believed tablet use would become widespread “as volumes rose and prices fell”.

Carlos’ firm Telmex(TMX) serves 275 million customers in Mexico. America Movil controls 60% of the mobile market in Mexico. Spain’s Telefonica(TEF) is the largest competitor to America Movil (AMX).

An article in the Economist Intelligence Unit last month discussed the growth of smartphones Latin America. From the article:

The narrowing gap between smartphones and feature phones helped drive growth in Latin America’s mobile phone market in the first quarter of 2011, according to a press release from consultancy IDC.

IDC said smartphone shipments in the region were aided by carriers working to move customers to 3G networks, as well as the launch of new Android and Windows Phone devices in the market.

According to the consultancy, vendors in the region shipped more touchscreen and Qwerty models. Additionally, IDC said average selling prices declined due to aggressive Chinese vendor expansion.

AMX, Telefonica, Telecom Italia(TI) respectively controls about 30% of the Brazilian mobile market with the rest split between smaller players.

Five Latin American telecom stocks with more than 5% dividend yields are listed below for consideration:

1.Company:Telefonos De Mexico SAB De CV (TMX)
Current Dividend Yield: 5.74%
Sector: Telecom
Country: Mexico

2.Company:Telecom Argentina Sociedad Anonima (TEO)
Current Dividend Yield: 8.89%
Sector: Telecom
Country: Argentina

3.Company: Telecomunicacoes de Sao Paulo SA Telesp (VIV)
Current Dividend Yield: 12.67%
Sector: Telecom
Country: Brazil

4.Company: Tele Norte Leste Participacoes SA (TNE)
Current Dividend Yield: 14.53%
Sector: Telecom
Country: Brazil

5.Company: Telefonos De Mexico SAB De CV (TFONY)
Current Dividend Yield: 5.79%
Sector: Telecom
Country: Mexico

Nasdaq-traded NII Holdings, Inc (NIHD) offers wireless communication services under the Nextel brand in Mexico, Brazil, Argentina, Peru and Chile. NIHD does not pay a dividend but the total revenue last year was nearly $6.0 billion and the 5-year earnings growth is 13.50%.

Disclosure: No Positions

A Review of the World’s Second Largest Retailer

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Carrefour SA of France is the second largest retailer in the world after Wal-Mart(WMT) and is also the largest retailer in Europe. The group operates four main grocery store formats: hypermarkets, supermarkets, hard discount and convenience stores. Carrefour currently has over 15,500 stores worldwide, either company-operated or franchises.

The major markets for Carrefour are: Asia, Latin American and Europe. While the company is present in over 34 countries, the majority of its revenues(about 57%) still come from France. Carrefour sees strong growth in many emerging markets such as China, Brazil, Indonesia, Poland and Turkey.

Carrefour was first listed on the Parix exchange in June 1970. Currently the stocks is a component of the CAC 40, SBF 120, FTSE 100, DJ Euro STOXX 50 indices.

Until May 30, 2011 Carrefour ADR traded as an unsponsored ADR on the OTC markets with the ticker CRERY. On May 31st, the ADR was converted into sponsored ADR. The stock currently trades under the symbol (CRRFY).

At the closing price of $7.72 on Friday, the ADR has a dividend yield of 3.350%.

For more information on Carrefour please visit their investor relations site.

Disclosure: No positions

 

Components of FTSE Multinationals Index

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The FTSE Multinationals Index is comprised of companies which derive more than 30% of their revenue outside their region. The majority of the top 100 companies in this index are from the developed world.

Five components from the FTSE Multinationals Index are listed below:

1.Company:Danone SA (DANOY)
Current Dividend Yield: 2.56%
Sector:Food Processing
Country: France

2.Company:Diageo PLC (DEO)
Current Dividend Yield: 2.48%
Sector:Beverages (Alcoholic)
Country: UK

3.Company:BASF SE (BASFY)
Current Dividend Yield: 3.53%
Sector:Chemical Manufacturing
Country:Germany

4.Company:Nestle SA (NSRGY)
Current Dividend Yield: 3.39%
Sector:Food Processing
Country: Switzerland

5.Company:Emerson Electric Co (EMR)
Current Dividend Yield: 2.66%
Sector:Scientific & Technical Instruments
Country: USA

To download the fill list of companies please click here.

Disclosure: No positions

One More Reason Why Healthcare in U.S. is Expensive

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I have written many times before comparing the healthcare system in the U.S. to systems in other developed countries. It is a well know fact that despite having the highest healthcare spending among developed countries Americans get the least bang for the buck. For example, the state-run Medicare program is on track to consume 7% of the GDP by 2035, double that of the current level according to Congressional Budget Office.

Compared to the costs for other services healthcare costs have been rising exponentially over many years. The causes for this runaway inflation in healthcare are many and an analysis of the reasons behind this tremendous surge in costs would require an exhaustive study to pinpoint the various causes and their impacts.The following chart from an Bloomberg BusinessWeek article shows the per capita spending on drugs by some developed countries:

Click to enlarge

drug-bills-compare.jpg

Source: Bloomberg BusinessWeek

The Debate on Bank Stocks Continues

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Many U.S. bank stock reached a new low in recent months yesterday. The argument for and against bank stocks continues among investors and Wall Street Pros alike.

From Bank Shares Take a Beating, and It May Not Be Over Yet in the New York Times:

For individual investors, who have long favored bank stocks as a source of dividends and at least the promise of stability, their recent performance has been a big disappointment. And few experts expect a turnaround anytime soon.

“I haven’t seen investor sentiment this bad in a long time,” said Jason Goldberg, a longtime bank stock analyst at Barclays. “Not owning the group has been the right call, and people are skeptical about getting back in.”

By many measures, the sector is pretty cheap. Diversified banks are trading at about 9.4 times earnings, compared with a multiple of 12.4 for the broader S.& P. 500, according to FactSet Research.

But then, they may deserve to be selling at a discount. Besides the worries about a possible debt downgrade and the investigations into the role they played in the financial crisis, major banks are facing headwinds on many fronts.

For starters, federal regulations passed last year are set to cut deeply into revenue on everything from debit card transactions to trading on Wall Street.

From a related article in The Journal:

Banks were drubbed again last week as data showed the economy faltered in May. The KBW Bank Index of major U.S. banks fell 4.1%, compared with the Dow Jones Industrial Average’s 2.3% decline. This week could be rocky, too, some analysts said on Friday, because of worries that the Federal Reserve might force big U.S. financial institutions to sharply increase their capital cushions.

banks.jpg

Despite the overall market’s recent struggles, the Dow still is up 5% so far this year. But Goldman has tumbled 20%, while Citigroup Inc., Morgan Stanley and Bank of America Corp. are each down by about 15%.

The decline in bank stocks could cast a shadow over the rest of the stock market. Wall Street lore says the overall market can’t rally unless bank stocks gain. The Dow has fallen 5.2% from the three-year high touched at the end of April.

“The financial sector is an integral underpinning of the economy, and it’s going to be very difficult to get a continuing rally without participation from the financials,” says Alan Gayle, senior investment strategist with RidgeWorth Investments. He prefers the industrial and technology sectors.

Banks may be losing their importance to the rest of the market, Mr. Gayle says, partly because the slide in their shares has reduced the industry’s market value.

Bank of America(BAC) closed at $10.83 yesterday on heavy volume.The 52-week low is $10.75 and the current dividend yield is just 0.35%.

In Europe, banking regulators have postponed the release of another round of stress tests. However the storm clouds are circling again over European banks due to the resurgence of the debt crisis in Spain, Greece, etc.

Among the U.S-traded foreign bank stocks, some are performing well. Eight foreign banks that are up by more than 10% YTD are listed below:

1.Bank:Swedbank AB (OTC:SWDBY)
Current Dividend Yield: 1.91%
YTD Change: 24.68%
Country: Sweden

2.Bank: ING Group NV (ING)
Current Dividend Yield: N/A
YTD Change: 18.90%
Country: The Netherlands

3.Bank: BNP Paribas SA (OTC: BNPQY)
Current Dividend Yield:2.43%
YTD Change: 18.62%
Country: France

4.Bank: UBS AG (UBS)
Current Dividend Yield: N/A
YTD Change: 13.96%
Country: Switzerland

5.Bank: Nedbank Group Ltd (OTC:NDBKY)
Current Dividend Yield: 3.86%
YTD Change: 13.24%
Country: South Africa

6.Bank: Deutsche Bank AG (DB)
Current Dividend Yield: 1.86%
YTD Change: 10.93%
Country: Germany

7.Bank: Banco Bilbao Vizcaya Argentaria S.A. (BBVA)
Current Dividend Yield: 7.59%
YTD Change: 10.82%
Country: Spain

8.Bank: Toronto Dominion Bank (TD)
Current Dividend Yield: 3.29%
YTD Change: 10.11%
Country: Canada

Note: Dividend yields noted are as of June 6, 2011

Disclosure: Long TD, SWDBY, BBVA, ING, NDBKY

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