The Right "Price" for Latin American Investing

03/06/2017 7:00 am EST


Robert Carlson

Editor, Retirement Watch

U.S. stocks have done well, but they aren’t the only strong investment in the world. International stocks and commodities also are delivering solid returns from lower starting points, suggests Bob Carlson, editor of Retirement Watch.

We became attracted to non-U.S. stocks and commodities after the collapse of early 2016. It looked to us like the capitulation of the bear markets that started in 2011.

Most international stocks had low valuations, and fundamentals were improving. Many companies outside the United States have greater potential for higher earnings and profit margins.

Our double-play to take advantage of both rising commodity prices and improving overseas economies is T. Rowe Price Latin America (PRLAX).

The fund has more than recovered from its post-election tumble, which was triggered by exaggerated fears that a trade war would hurt Latin American economies.

Most Latin American economies still are commodity-based and benefit from a recovery in commodity prices. The commodity bull market is likely in its early stages even after strong returns since February 2016. The fund will continue to be volatile, but the major trend should be higher prices.

PRLAX searches for companies that are growing and are likely to continue that growth. It also wants to buy stocks selling at reasonable prices.

 The fund is a long-term investor and focuses on relatively few stocks. It recently increased its portfolio to 54 stocks from 48. About 52% of the fund is in the 10 largest positions.

Annual turnover of the portfolio is only 27%. Financial services, consumer defensive and consumer cyclical stocks dominate the portfolio.

Most of the fund, 61%, has been invested in Brazil (a top-performing market in 2016 despite political and economic problems). Other top country exposures are Mexico (17.5%), Peru (6.4%), Chile (4.9%) and Argentina (4.9%).

The fund’s been on a roll, despite the hiccup in the fall of 2016. It’s up 8.13% in the last four weeks, 14.10% so far in 2017 and 50.10% for the last 12 months.

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