A Latin American Trio
03/03/2006 12:00 am EST
Jordan Kimmel focuses on firms with "pricing power and accelerating cash flow"—factors that act like a "magnet" attracting other investors. The editor of Magnet Investing, uncovers a trio of Latin American buys—two mining companies and a transportation play.
"Using my 'Magnet Stock Selection Process,' I quantitatively isolate those companies with the highest revenue growth, combined with the highest accelerating profit margins, to identify where growth is truly coming from. Then taking this universe of companies we see which stocks trade at a discount to their current valuation and which ones are under accumulation highlighted by an improving relative price trend.
"I continue to see several groups and many stocks that meet our criteria—therefore I remain solidly— but selectively bullish. There are many who believe that the energy and basic materials sectors have come too far too fast, and currently contrarian investors are quick to dismiss these sectors. Here are some favorite stocks for those looking to add international positions.
"Southern Copper Corp. (PCU NYSE) is an integrated producer of copper, molybdenum, zinc, and silver. PCU is South America’s largest and most profitable copper producer—t he company engages in mining of open pit mines; milling and flotation of copper ore to produce copper concentrates; smelting of copper concentrates to produce blister copper; and refining blister copper to produce copper cathodes. The company is highly profitable with a tremendous dividend. Copper smelting plants are simply not producing enough to keep up with worldwide demand. The tremendous cash flow and return on equity for this company makes it stand out in our model.
"Companhia Vale De Rio Doce (RIO NYSE) engages primarily in mining and logistics businesses. It engages in iron ore mining, pellet production, manganese ore mining, and ferroalloy production, as well as in the production of nonferrous minerals, such as kaolin, potash, copper, and gold. Profitable and based in Brazil, revenues, margins, and earnings are accelerating while the company still somehow manages to fly below the radar of most American investors. With an excellent valuation and high dividend, RIO is in a sweet spot for the global economy.
"Grupo TMM SA (TMM NYSE) operates as a multi-modal transportation and logistics company in Latin America. It primarily engages in various businesses, including trucking, third party logistics, container and railcar maintenance and repair, offshore supply shipping, clean oil and petrochemical products shipping, warehouse management, shipping agency, inland and seaport terminal. TMM has been showing solid top line revenue growth and generating significant cash flow, recently breaking out of a consolidation pattern to turn bullish."