by Louis Navellier | March 5, 2010 8:24 am
In the aftermath of a severe 8.8 magnitude earthquake, Chile is trying to pull itself out from under the wreckage. After the initial wave of relief to those who have lost shelter or have been injured in the disaster, the ports and infrastructure are a top priority if this export-reliant country is going to get back on track.
Chile has the one of the 50 largest economies in the world as measured by GDP, and has seen some big economic growth in recent years. However, there is a lot of uncertainty among investors right now as the clean-up continues and aftershocks ripple through the nation.
Let me state for the record though that I am not one of those traders running for the exit. The fact of the matter is that there are a number of Chilean companies that remain unshaken by the recent earthquake. These ADRs are some of the best investments you can make right now.
For those who are unfamiliar with the acronym, an ADR is an “American Depositary Reciept.” ADR shares are essentially the same as stock, only you’re buying a stake in a foreign company. The instrument is just a go-between global corporations use to avoid the complexity of currency exchanges and meet the SEC requirements for all companies listed on U.S. exchanges.
I love ADRs, because they can be bought and sold with regular brokers and are subject to the same rules as the stock of big-name blue chips like Walmart and GE. That allows even small-time investors to share in the big-time profits of emerging markets like China and Latin America without worrying about currency fluctuations or trading at all hours of the night when foreign markets are open.
The first Chilean ADR to buy is Enersis (ENI). This company is the largest utility in Latin America. Based in Chile, the company distributes power to almost 12 million customers (approximately 45 million people) in regions of Chile, Argentina, Brazil, Colombia and Peru. ENI shares have traded essentially flat in spite of the quake, because the company has operations beyond the region that will keep it profitable. And as booming Latin American economies increase their demand for electricity in the months ahead, this ADR will be flying high. ENI shares are trading at around $21.50, and are a good buy under $24. (Get my FREE fundamental analysis on ENI here)
The first is Chile’s A.F.P. Provida (PVD). Providia is the largest private pension fund management company in Latin America with approximately $35 billion in assets under management. The country’s social security system was privatized in 1981, and workers are now required to pay into these funds. The company has more than 3 million customers and more than 120 offices throughout Chile and controls nearly a third of the pension fund market in Chile. Seeing as this domestically traded ADR keeps most of its profits on paper, it should remain unaffected by the recent earthquake. The stock was trading near its 52-week high of about $51 before the quake and but shares have been pushed down in the mid-$40s. That provides a great buying opportunity. Jump into this stock as long as prices are under $48. (Get my FREE fundamental analysis on PVD here)
Three other Chilean ADRs that aren’t quite as strong buy still worth a look are:
Chile Endsea (EOC): This ADR is known as Empresa Nacional de Electricidad formally, and is the largest power generator in Chile and a top generator in South America. Enersis owns a 60% stake in this pick.
LAN Airlines (LFL): This regional airline transports passengers throughout Chile and Latin America. With about 70 passenger aircraft and 10 freighters, the company is nimble enough to adapt to economic conditions — but big enough to cash in on the growth of this emerging market.
Sociedad Quimica y Minera (SQM): A leading chemical company, SQM provides agricultural products to farmers around the world. But perhaps its most profitable angle is lithium mining. This element is crucial to fast-charging batteries in electronics and hybrid automobiles.
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