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Capture 10% Yields and +937% Capital Gains in One of the World's Fastest-Growing Economies

April 2, 2008

    
Until this decade, investing in Latin America was similar to a canoe trip on the Amazon River: a potentially rewarding journey -- but watch out for piranhas!  A country's stock market reflects its economy, and most Latin American economies were characterized by instability, unpredictability, and wild boom-and-bust cycles.

     But since the turn of the century, we've witnessed a sea change in Latin America.  Thanks to the confluence of several positive factors, the region's largest economies have become paradigms of strong, stable economic growth -- and its stock markets have surged as a result.

     Several factors have contributed to the change: stable, economically rational governments; increased exports thanks to globalization and trade liberalization; and rising commodity prices.  With these positives as a backdrop, Latin American stocks have delivered some of the world's highest returns this century . . .
 
Country Total Return
Since 1/1/2000
Argentina +353.7%
Brazil +256.7%
Chile +201.0%
Mexico +392.9%
U.S. (S&P 500) +3.3%

*Data as of March 31, 2008

     As you can see, if you're ignoring Latin America's investment potential, then you're missing out on some of the most compelling economic growth stories on the planet.

     Many regions throughout Latin America are enjoying a large-scale economic renaissance, falling inflation and increasing political stability.  And going forward, this should power tremendous returns for the well-placed investor.

     In fact, some Latin American economies are now as admirable as any in the world.  Just consider the case of Brazil . . .

      Latin America's Fastest-Growing Economy

     Brazil has become the model of economic success for Latin America.  The region's largest country is blessed with a wealth of natural resources and a diversified industrial base.  And its government finally has policies in place to help the country take advantage of these blessings -- notably, inflation has fallen to 3% to 4% a year, versus a double-digit rate several years ago.

     The worldwide increase in commodity prices has been a huge boon to Brazil.  Home to some of the world's most fertile land, Brazil is a major producer of agricultural products, many of which are in high demand throughout the world.  The nation's ample natural resources also include significant deposits of iron and manganese, major offshore oil reserves, and of course, the Amazon Rainforest.

     Brazilian oil production currently stands at 1.8 million barrels per day, up close to half a million barrels per day since 2001.  That's one of the fastest rates of production growth in the world outside OPEC.  With global oil demand in a long-term uptrend, and new supplies ever-harder to find, Brazil's oil trove is a major positive.

      In addition, Brazil benefits from a thriving industrial sector that includes the fairly low-cost production of cars, steel, airplanes and chemicals.  Brazil is also benefiting from fast-growing services industries -- its banking and telecom sectors are performing particularly well.  And finally, the nation's export economy remains strong -- exports have risen by about +15% per year over the past five years

     All of these factors have helped Brazil's economy post significant growth.  The nation's gross domestic product (GDP) now exceeds $1 trillion, ranking Brazil among the world's ten largest economies, according to the World Bank.

     And recent economic indicators show Brazil is continuing to deliver impressive growth despite the U.S. economic slowdown: in the fourth quarter of 2007, the Brazilian economy grew +6.2%, its fastest pace in several years.  Going forward, Brazil should continue to post annual GDP growth of at least +4-5% in the coming years -- about 2X or 3X greater than what we're likely to see here in the United States.

     Brazilian Stocks Deliver +937% Gains for U.S. Investors

     Investors have been quick to recognize Brazil's transformation from an economic backwater into one of the world's leading economies, and as a result, the Brazilian stock market has boomed: the Bovespa Stock Index has gained +440.8% over the past five years, and it's up +33.1% over the past year.  It's also held strong despite the recent global sell-off -- Brazilian stocks have actually jumped +13.5% since late January.

     In addition, the Brazilian currency -- the real -- has soared against the U.S. dollar in recent years and remains a great candidate to continue to rise.  Brazilian interest rates are high -- 11.25% for the benchmark government bond yield -- which encourages investors around the world to purchase reals.

     Keep in mind that when the Brazilian real gains against the U.S. dollar, it boosts the value of Brazilian stocks -- and their dividend payments -- when translated back into dollars.  This currency effect provides a nice boost for U.S. citizens investing in Brazil.

     When you include the currency impact, U.S. investors have earned sensational returns by investing in Brazil . . . 

Five-Year Total Returns

Country What Local Investors Earned What U.S. Investors Earned
Brazil +440.8% +936.6%
United States +70.9% +70.9%

Data from April 2003 - April 2008
 
Source: Bloomberg

     Bottom line -- I believe we're in the early innings of a major bull market in Brazil.  And as its economy continues to grow, corporate earnings will follow suit.  Brazilian stock valuations are also attractive now: the Bovespa trades at less than 12 times earnings, which is inexpensive given the country's growth prospects.

     Capturing 10.1% Yields in Brazil

     There are many compelling reasons to invest in Brazil.  Aside from economic growth and capital gains, the nation is also delivering abnormally high dividends, and many individual stocks in Brazil are now dishing out yields of 6%, 8% . . . even 10% or more.

     That's where my premium newsletter -- High-Yield International -- comes in.  It's the only newsletter of its kind devoted exclusively to finding high-yielding securities in today's best-performing foreign markets.

     In my April 2008 issue, I profiled some of the most attractive dividend payers in the Brazilian market, including a rock-solid electric utility that is expanding throughout the country.  Thanks to strong economic growth and massive infrastructure investments, Brazilian electricity demand is booming, helping this firm deliver +21% revenue growth and an impressive 8.2% yield.  I also featured a Brazilian telecom that sports an enticing 10.1% dividend and has delivered total returns of +476% over the past five years.  And this attractive high-yield play now trades at less than 10 times analysts' earnings estimate for 2008 -- a screaming bargain.

     If you'd like to learn the names of these companies -- plus receive a steady stream of foreign stocks, funds and other investing ideas with abnormally high dividend yields each and every month -- then I'd like to extend you a personal invitation to try my premium international investing newsletter . . . High-Yield International.
Visit this link to learn more

      Thanks for joining me on my search for today's highest-yielding securities!




-- Nick Lanyi
Editor, High-Yield International 

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