Look south to the Mexico Fund

Ongoing changes in the Mexican market could unleash long-term value for investors.

By TheStockAdvisors Apr 24, 2013 9:52AM

Arrow Up © Photodisc PhotolibraryBy Brian Hicks, The Wealth Advisory


The vast majority of stocks in our model portfolio are focused on the U.S. economy. But for our latest recommendation, we're moving into Mexico.


The Mexican central bank reported that in February, foreign investors poured a record $80 billion into the nation's stocks and bonds. And we want to profit from it.


Mexico has long been plagued by an insidious form of corruption: crony capitalism. As a result, Mexicans pay much more for goods and services like phone calls, medicine, and airfare than the citizens of most other advanced countries, according to the Organization for Economic Cooperation and Development.


But recently elected President Enrique Peña Nieto is trying to change that with reforms that could make monopolistic industries like telecommunications more competitive, bolster oil production, and improve the government's finances.


You may recall that when the U.S. telecom market was deregulated and AT&T was broken up, it unleashed a massive amount of value for investors, consumers, and workers. Something very similar could happen in Mexico.


Earlier this month, Standard & Poor's upgraded the outlook for Mexico's sovereign credit rating to positive from stable, signaling a possible upgrade in the next 18 months.


The Mexico Fund (MXF) is a closed-end fund, which means the number of shares outstanding is fixed. This prevents the fund from diluting your value and also keeps the fund from growing too large to be effective.


Even with the painful 2008, this fund has averaged a 22% annual return for the last 10 years. That is absolutely fantastic -- and is a testament to the fund's management.


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