Five Mexican Stocks Hedge Funds Are Bullish On

Mexico, the ninth-largest oil producer in the world, saw its economy grow 2.5% in 2015 despite the disastrous plunge in crude oil prices, after the economy rose 2.3% in 2014 and 1.3% in 2013. Private consumption in Mexico was the main pillar of growth last year, thanks to stronger job creation, real wage growth and credit expansion. According to fresh government figures, Mexico’s economy grew 2.7% year-on-year during the first three months of 2016, slightly better most economists previously anticipated. If one seeks to get some exposure to Latin America, he or she should definitely have a look at the second-largest Latin American economy. While Brazil is caught between a political crisis and severe economic recession, Mexico’s economy is growing and politics are relatively stable. The main difference between the two largest Latin American economies is that Mexico’s economy is not as tied to commodities such as crude oil as the economy of Brazil. That said, Insider Monkey decided to compile a list of five Mexican companies trading on U.S. stock exchanges that are favored by the hedge fund vehicles tracked by our team, so investors seeking to get exposure to the Mexican economy should read this article up until the very end.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

#5. America Movil SAB de CV (ADR) (NYSE:AMX)

– Investors with long positions as of March 31: 11

– Aggregate value of investors’ holdings as of March 31: $226.21 Million

There were 11 hedge funds followed by Insider Monkey with stakes in America Movil SAB de CV (ADR) (NYSE:AMX) at the end of the first quarter, as compared to 10 registered at the end of the prior quarter. The overall value of those stakes rose by 15% quarter-over-quarter to $226.21 million, partly due to a 10% increase in the value of America Movil’s American Depositary Shares (ADSs). The telecommunications company has seen its market value decline by 37% in the past two years and 10% in 2016 alone as a result of new regulations imposed to curb the telecom giant’s dominance. The pan-Latin American mobile phone operator’s operating revenues grew by 5.4% in 2015, after increasing 6.0% in 2014. The increase in America Mobil’s 2015 top line was driven by higher revenues from wireless data and fixed data operations, partially offset by lower revenues from wireless voice, fixed voice and Pay TV operations. Ken Fisher’s Fisher Asset Management upped its stake in America Movil SAB de CV (ADR) (NYSE:AMX) by 55% during the March quarter to 6.73 million ADSs.

#4. Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS)

– Investors with long positions as of March 31: 12

– Aggregate value of investors’ holdings as of March 31: $178.00 Million

The number of asset managers from our system with long positions in Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS) increased to 12 from 11 during the first three months of 2016, while the aggregate value of those positions grew 9% quarter-over-quarter to $178.00 million. The company’s ADSs appreciated nearly 23% during the first quarter, so asset managers were actually trimming their stakes in Controladora Vuela during the three-month period. The shares of the ultra-low-cost carrier have gained 8% since the beginning of the year. Controladora Vuela’s business has grown significantly since commencing operations in 2006, as the company’s routes increased from five to more than 148 at the end of December and its Airbus A320 family aircraft from four to 56. The carrier’s management plans to increase the company seat capacity by roughly 18% in 2016 and 19% in 2017, so there is more room to grow for Controladora Vuela ahead. Rob Citrone’s Discovery Capital Management has 2.95 million ADSs of Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS) among its pool of holdings as of the end of March.

The next page of this article will disclose three other Mexican companies trading on U.S. stock exchanges that are favored by the hedge funds monitored by our team. 

#3. Fomento Economico Mexicano SAB (ADR) (NYSE:FMX)

– Investors with long positions as of March 31: 17

– Aggregate value of investors’ holdings as of March 31: $331.96 Million

Fomento Economico Mexicano SAB (ADR) (NYSE:FMX) gained some popularity among the hedge funds tracked by Insider Monkey during the January-to-March period, when the number of funds invested in the company increased to 17 from 15 quarter-on-quarter. Similarly, the dollar value of those funds’ equity investments in the company jumped by 47% quarter-over-quarter to $331.96 million, partially due to a 4% gain in the value of Fomento Economico Mexicano ADSs. FEMSA, which owns the largest convenience-store chain in Latin American and the second-largest equity stake in brewer Heineken NV, has seen its ADSs gain 2% since the start of the year. Earlier this month, the company revealed it had successfully acquired Big John, a convenience store operator based in Santiago, Chile. The freshly-acquired company operates 49 stores primarily in the Santiago metropolitan area. The purchase follows the acquisition of a majority stake in Chilean drugstore operator called Socofar, completed in the second half of last year. Cliff Asness’ AQR Capital Management reported owning nearly 498,000 ADSs of Fomento Economico Mexicano SAB (ADR) (NYSE:FMX) through the latest round of 13Fs.

#2. Cemex SAB de CV (ADR) (NYSE:CX)

– Investors with long positions as of March 31: 18

– Aggregate value of investors’ holdings as of March 31: $152.40 Million

Cemex SAB de CV (ADR) (NYSE:CX) was a hedge fund darling in the first quarter of 2016, as the number of money managers from our database with equity investments in the company doubled to 18 quarter-over-quarter. Correspondingly, the overall value of those investments grew by 60% quarter-on-quarter to $152.40, partly due to a 31% price appreciation of the company’s ADSs. The world’s second-largest cement company has seen its market capitalization increase by 22% since the start of 2016. Earlier this year, Cemex SAB amortized $397.4 million worth of debt that was due to expire in 2018 and 2019, as part of its refinancing strategy to lower costs. The company also recently announced plans to sell U.S. assets valued at roughly $400 million to Mexico’s Grupo Cementos de Chihuahua, as part of its plan to raise up to $1.5 billion in asset sales in 2016. Howard Marks’ Oaktree Capital Management was the owner of 6.57 million ADSs of Cemex SAB de CV (ADR) (NYSE:CX) on March 31.

#1. Grupo Televisa SAB (ADR) (NYSE:TV)

– Investors with long positions as of March 31: 29

– Aggregate value of investors’ holdings as of March 31: $1.98 Billion

Grupo Televisa SAB (ADR) (NYSE:TV) also received some love from the hedge funds followed by our team during the January-to-March period, with the number of funds invested in the company increasing to 29 from 22 during the three-month period. Even so, the aggregate value of those funds’ equity investments in Grupo Televisa shrunk 2% quarter-over-quarter to $1.98 billion, so some funds trimmed their exposure to the company quite significantly during the quarter. The 29 asset managers invested in Grupo Televisa amassed 12% of the company’s total number of outstanding shares. Televisa, a leading media company in the Spanish-speaking world, a cable operator and an operator of direct-to-home satellite pay television system in Mexico, has seen the value of its ADSs decline by 4% since the start of 2016. The Mexican television broadcaster will not be able to air the upcoming Olympic Games in Brazil after the company failed to reach an agreement to purchase broadcasting rights from America Movil SAB. The Bill & Melinda Gates Foundation Trust, overseen by Michael Larson, owns 16.88 million ADSs of Grupo Televisa SAB (ADR) (NYSE:TV) as of the end of the first quarter.

Disclosure: None