Compania de Minas Buenaventura SA (ADR) (NYSE:BVN) and
Compania de Minas Buenaventura SA (ADR) (NYSE:BVN) is a gold and silver miner that operates in Peru, and is a partner with Newmont Mining Corp (NYSE:NEM) in the Conga and the Yanacocha mining projects in the country. The company recently hit a new 52 week low on the back of the plunging gold price and its disappointing first quarter 2013 results, which saw the company miss analyst estimates. Earnings per share fell by 26% quarter over quarter and 51% year over year to 40 cents.
However, the company does have a relatively low cash operating cost per ounce. This ranges from $341 to $639 per ounce depending on the mine, which still makes the company quite profitable despite gold being down by 13% for the year to $1,470 per ounce.
Credicorp Ltd. (USA) (NYSE:BAP) is the largest banking and financial services company operating in Peru, though it also has operations in Chile, Bolivia and Colombia. The company has been going from strength to strength over the last five years with net interest income, non-interest income and net income growing significantly, as the chart below illustrates.
Source data: Credicorp Financial Filings 2008 to 2012
The bank has also embarked on an aggressive expansion into investment banking, seeing it acquire controlling interests in Chilean IM Trust and Colombian stock broker Correval, giving it a strong presence in the Andean region. This has been a key driver of the bank´s strong growth in non-interest income and has diversified the bank´s income streams. Overall, I expect to see Credicorp Ltd. (USA) (NYSE:BAP) continue to perform strongly, with both solid revenue and net income growth on the back of its recent acquisitions and the promising outlook for Peru´s economy.
The final option is the iShares MSCI All Peru Capped Index Fund (NYSEARCA:EPU) All Peru Capped Index ETF, which has performed flatly for the year to date, only being up by 2%. The ETF’s top three holdings are Credicorp Ltd. (USA) (NYSE:BAP), Southern Copper Corp (NYSE:SCCO) and Compania de Minas Buenaventura SA (ADR) (NYSE:BVN). Combined, these three companies make up just over 45% of the ETF’s total holdings, leaving it exposed to both the downward pressure on gold and silver prices, as well as diminished Chinese demand for commodities and in particular copper. But with the ETF’s performance having been relatively flat, it does give investors an opportunity to gain broad exposure to Peru´s stock market and the broader economy.
Bottom Line
Overall, the outlook for Peru´s economy is extremely positive and it is clear that the country will continue to experience solid economic growth for some time yet. This will translate into increased business activity, growing infrastructure investment and greater domestic consumption, which will see many of Peru´s company´s thrive, driving their share prices higher.
The article Why Investors Should Consider Peru originally appeared on Fool.com is written by Matt Smith.
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