4 hot Latin American ETFs for your portfolio

Regional GDP growth might be slowing, but it should be sustainable.

By InvestorPlace Mar 22, 2012 10:04AM
By Susan J. Alise

China and India might be the first countries that come to mind when the topic turns to emerging-market opportunities, but some of the most intriguing plays now are just south of the border in Latin America.


Latin America is an exciting area for investors now because the region as a whole is experiencing economic expansion. Slower growth in trading partner economies like China is expected to have an impact on that rate of growth in the near future, so don't expect the recent 5.4% GDP growth to continue.


Still, the Inter-American Development Bank last week forecast 3.6% growth in 2012, which is not too shabby. True, the region is less prepared today to respond to another major meltdown like the 2007 global financial crisis. But barring any dramatic events -- such as a collapse in commodity prices or hemorrhage in European banks -- the region should continue to keep its growth rate on track.


Another plus for Latin American economies: a growing middle class. There were 56 million more middle-class households in Latin America last year than there were in 1999, according to the United Nations Economic Commission for Latin America and the Caribbean. “This represents a formidable increase of the consumers' market,” the group said.


Despite that opportunity, investing in Latin America is tricky. You have a lot of choices: different countries, different vertical markets and a plethora of individual stocks. One of the easiest ways to invest in these emerging markets is through exchange-traded funds. ETFs trade over a major exchange. They provide diversification among several stocks, and there are so many funds available that you should be able to find one to match your objectives.


However, you should note that emerging-market stocks or ETFs are best suited for investors who have a long time horizon and an appetite for above-average risk. But if that describes your investment mind-set, these four Latin American ETFs could make good additions to your portfolio.


iShares S&P Latin America 40 Index Fund (ILF): If you're looking for diversification across many countries and sectors, ILF is a good choice. The ETF is tied to the S&P Latin America 40 Index, and major holdings include wireless provider America Movil (AMX), Brazilian energy giant Petrobas (PBR), iron ore producer Vale SA (VALE) and Wal-Mart de Mexico (WMMVY). While ILF is down about 2% over the past 52 weeks, it has returned almost 13% year-to-date -- and it even sports a nearly 3% dividend yield. ILF has about $2.1 billion in assets, costs about $48 per share and has a 0.5% expense ratio.


Global X Colombia ETF (GXG): Not too long ago, when you mentioned Colombia, all most people thought of was Juan Valdez and Pablo Escobar. That's no longer the case now that the oil boom and heavy government infrastructure spending are fueling economic growth. Colombia's GDP grew 5.6% in the fourth quarter of last year, according to economists polled by Dow Jones. GXG, which has about $154 million in assets, is tied to the FTSE Colombia 20 Index and holdings include Ecopetrol (EC), Bancolombia (CIB), banking and telecom giant Grupo Aval Acciones y Valores and public utility company Isagen. GXG, which also has a dividend yield around 1%, is up 6.7% in the past 52 weeks and has gained more than 20% year-to-date. GXG runs around $21.50 per share, and its expense ratio is on the high side at nearly 0.8%.


IShares MSCI Brazil Small Cap Index Fund (EWZS): Economists and other prognosticators have panned Brazil of late, noting that the regional powerhouse has lost ground to Colombia, Chile and Peru. Still, 3.3% growth is still growth, and the country remains Latin America's fastest-growing travel and tourism economy. EWZS, with just $65 million in assets, aims to replicate the performance of the MSCI Brazil Small Cap Index, and major holdings include bus manufacturer Marcopolo, utility company Copasa, real estate companies Gafisa (GFA) and BR Properties and private education company Kroton Educacional. A strong year-to-date performance of more than 24% has helped EWZS claw back to a slight gain in the past 52 weeks, and the fund also yields about 2% in dividends. EWZS costs around $27.50 per share and has a 0.6% expense ratio.


iShares MSCI Peru (EPU): Like its Andean neighbors Colombia and Chile, Peru's economy has been growing at a fast clip: growth slowed to 5.4% in January. The nation's finance minister recently forecast 5.7% growth for the remainder of this year. Peru primarily is a metals and mining play -- the country is a major gold, silver and copper producer. Materials account for more than half of EPU's holdings, including Buenaventura (BVN), Southern Copper (SCCO) and Volcan. It also holds consumer products firm Alicorp and financial giant Credicorp (BAP). EPU, with about $500 million in assets, has gained about 4% in the past 52 years and is up 16% year-to-date. It sports a 2.3% dividend, costs just under $45 per share and has an expense ratio of 0.59%.


As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.


Related articles

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

122
122 rated 1
288
288 rated 2
472
472 rated 3
638
638 rated 4
628
628 rated 5
704
704 rated 6
609
609 rated 7
489
489 rated 8
275
275 rated 9
129
129 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
CTSHCOGNIZANT TECHNOLOGY SOLUTIONS10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
ITUBITAU UNIBANCO BANCO MULTIPLO S.A.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.