Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

How To Play The World’s Most Overlooked Emerging Market

Published 03/15/2017, 04:38 AM
Updated 05/14/2017, 06:45 AM
US500
-
DOW
-
KO
-
SHEL
-
ARGT
-
EMDEm
-

Luscious fruits and vegetables, exquisite beaches and fine automobiles.

These are just a few cogs in the $456 billion Argentine economic machine — Latin America’s second-largest economy.

But above all, this emerging market is home to the world’s hottest small-cap utility stock.

This company’s shares have popped by nearly 1,900% in the last five years.

Yes, you read that right.

A boring utility stock that’s outperformed the majority of the companies that make up the S&P 500 over the same period.

Better yet, there’s way more upside ahead.

Senior analyst Jonathan Rodriguez provides all the details on the stock that not even President Trump could stamp out…

Not Even Trump Could Kill This Stock

When it comes to emerging markets, Argentina might not be your first choice for finding high-growth opportunities.

Here’s why it should be, though…

As Louis notes above, Argentina is Latin America’s second largest economy, with a $456 billion GDP, as of 2015.

And after years of crippling policies, the country elected a conservative president in 2015 who was bent on reform.

In the last two years, President Mauricio Macri has already shaken up the establishment.

He’s lifted currency controls, cut generous — but costly — federal subsidies and settled a decades-long debt default dispute with American hedge fund financiers.

You may recall that Argentina defaulted on more than $100 billion of debt between 2001 and 2002.

This move cut the country off from the international capital markets for more than 10 years.

But the government’s $4.6 billion settlement with the hedge funds to restructure debt overcomes a major financing hurdle…

That is, showing the world that it will make good on its debts.

On his reforms, Macri has also garnered pledges of more than $30 billion in foreign investments from some of the world’s largest companies: Coca-Cola Company (NYSE:KO)., Royal Dutch Shell (LON:RDSa) plc and Dow Chemical (NYSE:DOW) Inc.

Last year, Moody’s upgraded the country’s credit rating to B3 from Caa1 — reflecting the agency’s growing confidence in Macri’s reforms.

In fact, MSCI — one of the world’s largest market indexers — will review Argentina’s status as an emerging market and may include it in its EM index.

JPMorgan noted that the country’s inclusion in the index alone could result in a $1 billion inflow.

This has the market’s undivided attention.

Here’s how you can get in on the action…

More Power to YOU

Empresa Distribuidora Electrica Regional SA (BA:EMD) is Argentina’s largest power company.

The company, which is also known as Edenor, provides electricity for nearly three million people in northern Buenos Aires city and the greater metropolitan area.

In fact, Edenor accounts for 20% of total market share in the country’s power distribution industry.

Over the last three years, revenue has grown by 10%, to 3.4 billion pesos. Earnings have grown 27% in the same period.

Through strategic cost cuts, Edenor has driven growth of cash from operating activities by 497% since 2012.

And while a trade war could certainly hurt emerging market companies that trade with other countries, Edenor generates all of its revenue in Argentina. This insulates the company from much of the potential fallout.

The stock trades at 19.6 times forward earnings — a premium to the industry average and the broader Argentine stock market.

But for a stock that’s gained almost 1,900% in the last five years, that ain’t bad.

And Edenor makes up for its premium valuation many times over in momentum.

In the last year, shares have gained 116% — versus a 40% gain for the Global X MSCI Argentina (NYSE:ARGT)… and a mere 19% rise of the S&P 500.

The key catalyst for the recent move in shares is the stock’s likely inclusion (along with eight other stocks) into the MSCI Latin America index.

This, along with Argentina’s review for emerging-markets classification, could attract major capital inflows into the country — and Edenor shares.

The stock has retreated slightly from its 52-week high. But it’s found support along its February low price around $24.80.

This represents a fantastic entry point for what could be another massive upward move.

Of course, this play isn’t for the squeamish.

But an opportunistic investor could do quite well with Edenor in their portfolio.

On the hunt,

Original post

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.