I have made it a bit of a tradition to kick off a new year by traveling to a part of the world I have yet to explore. I view it as half work and half fun, which is the perfect combination for me. The fun part involves taking in the landmarks and enjoying good food and drinks. The work part is all about searching for new investment ideas. By seeing other cultures firsthand, analyzing how they live and talking to both locals and other travelers, I get a true sense of that part of the world.
Some trips produce more investment ideas than others, but I’m happy to report that this year’s adventure did clarify some NexGen moneymaking opportunities that I fully expect to act on in 2018.
I was fortunate to spend some time along the Pacific coast of Nicaragua. For relaxation, I enjoyed yoga, surfing and soaking up the sun with the monkeys outside my casita. For work, I was focused on finding out more about Latin America and tapping into local knowledge to get a sense as to where the region is heading. It was my first time in Nicaragua, but I have read a lot about it and knew it is one of Latin America’s poorest nations. Despite that, it is considered safe and a low-cost place to retire. In fact, the real estate market is already booming, and after spending two weeks there, I better understand why.
In the past, investing in Latin America was basically limited to Mexico and Brazil, with a little bit of Chile and Peru sprinkled in for good measure. The iShares Latin America 40 ETF (ILF) is made up of the 40 largest publicly traded companies in Latin America, and the top 10 holdings are based in either Brazil or Mexico. Those two countries make up 82% of the portfolio, with Chile sitting at 12%. The ETF had a solid 2017 as it gained 24%, but the real upside was in the smaller Latin American countries, and that will remain the case going forward.
For example, one of the best performing countries in 2017 was Argentina, which doesn’t even have a weighting in ILF. Instead, we need to look at the Global X MSCI Argentina ETF (ARGT), which surged 53% in 2017 and has stayed on the move here in 2018, gaining 6% in the first 10 trading days of the year and moving higher eight of those days. That’s exactly why my focus isn’t on the mainstream ideas here.
More Opportunity Off the Beaten Path
Latin America is not a new area of focus for me. In fact, my NexGen Profit Multiplier subscribers just made 16.5% in only three months in a Latin American metals company. Still, the key takeaways from my trip are:
- The opportunities in Latin America have become much more widespread, and
- We can make more money looking outside of Brazil and Mexico.
The number of expats from the U.S. and other wealthy people from around the world flocking to Nicaragua is very surprising. I have witnessed the same type of migration in other Latin American countries, and as more money moves in the economies naturally get a boost. This leads to new infrastructure, better medical facilities, new neighborhoods, less corruption, better safety – and ultimately big growth for the country, its people and investors alert enough to spot the opportunity early on.
Investing in the emerging and frontier markets of Latin America will not always be a smooth ride, but there is absolutely no question that the risk is worth the reward when you do it the right way. Our NexGen system factors in fundamentals, technicals and intangibles – think of them as catalysts – along with specific risk management strategies to limit losses. When you rack up a series of big wins against only a few small losses, you’re starting to make serious money.
One Country to Watch
As far as Nicaragua itself is concerned, it is basically impossible to invest in that country directly other than buying some land or owning a home there. That means we have to look at other countries in that same region that also present exciting growth opportunities and have stocks trading on major U.S. exchanges as ADRs, or American Depositary Receipts. There are also ETFs available for U.S. investors. That’s one of the big advantages of ETFs – they can help you invest in areas that would otherwise be inaccessible.
There is one country in particular that has lagged its peers in Latin America and could be setting up for a breakout: Colombia. The country best known for one of the most ruthless and wealthiest drug lords ever, Pablo Escobar, has started a new chapter. (If you’re really in the mood to binge watch something, check out Netflix’s Narcos, which is the story of Escobar. It’s very good.)
Times have really changed from the days of Colombia being the drug capital of the world. In 2016, The Economist named Colombia its “country of the year,” and President Juan Manuel Santos was honored with the Nobel Peace Prize after negotiating an agreement with the rebel group FARC and ending 50 years of war.
I was fortunate to visit Colombia two years ago and saw firsthand how the country was changing. I see Colombia about 10 years ahead of where Nicaragua is today, as the country is on the cusp of becoming a major player in the energy scene and as a tourist destination.
The Global X MSCI Colombia ETF (GXG) is a basket of 25 stocks that gives investors exposure to the entire country. It has been somewhat volatile the last four months or so, but renewed strength helped it bounce nearly 15% off its recent low, and it is now on the verge of breaking out to its highest levels in three years.
I’m watching it closely along with a few other Latin American countries that are solid NexGen plays based on their ability to export goods in high demand from the growing global economy. I am sure some of the stocks and ETFs will give us good buying opportunities soon.