3 emerging market banks to buy
The financial sector can be a volatile place for investors right now, but these Latin American banks are booming
The financial sector has been a strange double-edged sword in portfolios over the last two years or so. In the wake of the Lehman Brothers bankruptcy, billions of wealth was erased in what were long thought of as conservative stocks. Then the resurgence of some banks since the lows of last year made other investors a fortune, with Citigroup (C) and Bank of America (BAC) both soaring about 300% since historic lows on March 9, 2009.
The drama continues in the financial sector even now with the endless see-saw of mortgage default news and the continued worries over sovereign debt in the euro zone. Any investor jumping into financial stocks right now is really taking the tiger by the tail – but if you do your homework, there a number of opportunities in the sector become clear -- particularly among financials in Latin America.
Here are three:
Argentina stock Banco Macro (BMA) is a diversified bank that serves middle- and low- income residents as well as some of the nation’s largest commercial enterprises. With a market cap of around $1.7 billion, this stock is large enough to leverage its resources and scale but also small enough that it can deliver aggressive returns. BMA stock has seen four consecutive quarters of earnings growth and three-straight earnings surprises -- the largest of which came last quarter with a +35% earnings beat. This kind of momentum shows the fundamental strength you should look for in any stock.
Colombia’s BanColombia (CIB) is another fundamentally sound financial stock, sitting on a +3% gain year-to-date even as the rest of the U.S. stock market has slipped by the same amount. Its services include savings accounts for regular Colombians as well as pension plans and corporate loans for businesses that are seeing brisk growth thanks to the global recovery. BanColombia has enhoyed three consecutive quarters of earnings growth and four consecutive earnings surprises, the largest of which topped +28%.
Chile bank CorpBanca (BCA) is my third pick. It is the oldest bank in Chile, operating since 1871, with a network of more than 70 branches and upwards of 100 ATMs across the country. The pro-business environment ushered in by recently elected President Sebastián Piñera is fueling economic growth domestically, which is benefiting many of Chile's financial houses. But one word of warning -- this stock is thinly traded, so if you’re considering a purchase do so ONLY with a limit order within 25 cents of the previous day's closing price. If you place a market order for this stock you risk sending the stock price soaring and overpaying for shares significantly.
A booming middle class and resurgent economy is driving big profits for some smaller banks in the region like BMA, CIB and BCA. These are just three of my favorite bank stocks to buy. Click the link to find out 10 more great financial stocks -- and 12 to sell!
Also keep in mind that while most investors think of Brazil Investments and BRIC Funds when they think of emerging markets, many other South American nations provide huge opportunities. Argentina, Colombia and Chile should all be on your radar right now as top investment markets.
Full Disclosure: As of this writing, Louis Navellier was recommending shares of BCA to subscribers of his Global Growth newsletter.
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