Kelley Wright is the chief investment officer and portfolio manager of IQ Trends Private Client Asset Management and the managing editor of the Investment Quality Trends newsletter. He entered the industry in 1984 as a stockbroker; first at a private investment boutique and later at a major NYSE wire house. In 1990, Mr. Wright left the sell side of the industry for private investment management and has served as chief investment officer for three money management firms.
There are several underappreciated sectors in the region where investors can find good deals, if they know where to look, says Heiner Skaliks.
Undiscovered sectors in Latin America. We are here with Heiner Skaliks, and we are talking about where to look and where the hot spots are in Latin America when it comes to equities and fixed income plays.
Where do investors look? Where are you looking, I guess would be the best question there.
Let me go back to your question. You said both fixed income and equities, and I think that is absolutely right in the sense that Latin America has several opportunities on the investment front depending on what asset class you want to focus on.
If you are bullish on the growth potential that Latin America has because of the richness as far as commodities and natural resources, the equity space would be favorable. If you are bullish on the fact that Latin America has a growing middle class, a higher consumption per capita, higher wealth generation, then you would favor fixed income because of the generation of cash flow.
So depending on what your risk tolerance is you can look both in the equity space as well as the fixed-income space.
Where do you see the shining points of particular countries? Where do you see, say for example, Brazil or Chile? Where Chile, I think people perceive it to be a commodity based economy to a certain extent, but are the demographics there more fixed income or are they more equity?
Across Latin America, I would say that the demographics are very favorable. The average age in Latin America, for example, is 27 years versus 37 years average here in the US. So that gives us a more ample base to foster the pension fund system, and that pension fund system in turn is invested in capital markets.
We also have the multiple effect: Because it is such a young region, if you will, many of the needs are still there, whether it be buying a new house, whether it be starting a business, whether it be consumer spending.
So depending on what segment we look at, we feel that there is a potential there. There is a large portion of the population that does not have access to financial services so we do favor financial services for example.
Do you have a ticker or anything? Any banks that you like in particular, for example?
We are very bullish on BAP (BAP). They are based out in Peru. And consumer staples as well, because of the large portion of the population that is growing.
The population of Latin America is 550 million people. That is almost twice the size of the US, and it is becoming a very interesting target market. At the end of the day people need to eat, and at the end of the day those excess exports are shipped abroad.
As they rise in economic power, they don’t go out and buy a car first. They buy another set of shoes, and they buy a nicer shirt, and other things like that.
That is absolutely correct. I think there is a significant underserved portion of the population that still needs to get basic needs goods, if you will, and that gap is still a potential for a majority of the population.