Vale SA (ADR) (VALE), Itau Unibanco Holding SA (ADR) (ITUB), LATAM Airlines Group SA (ADR) (LFL): 3 Long-Term Picks to Benefit From Latin America

Page 1 of 2

Several major sporting events, including the next FIFA World Cup and Olympics, will be soon kick-off in Brazil. This means that the economic activity will be highly stimulated, not only through the consumption generated by the events but also by strong government spending.

If Brazil´s above average GDP growth makes its companies attractive investments, the current circumstances make them even more alluring. Offering plenty of upside, Vale SA (ADR) (NYSE:VALE), a mining company; Itau Unibanco Holding SA (ADR) (NYSE:ITUB), a bank; and LATAM Airlines Group SA (ADR) (NYSE:LFL) are three interesting stocks that could stand as worthy purchases for your long-term portfolio. Let’s take a closer look:

Vale SA (ADR) (NYSE:VALE)
Best of two worlds

Itau Unibanco Holding SA (ADR) (NYSE:ITUB) is the largest non-government Latin American bank. After proving resilient in tough economic patches, the firm looks poised to deliver strong returns on equity. A product of a merger between Itau and Unibanco, the bank seems to possess the best qualities of each one of its parts: Itau´s efficiency, cost effectiveness, and strong management and Unibanco´s underwriting standards, which result in lower nonperforming loan rates.

The conglomerate holds leading market shares in virtually all of its product offerings, including credit cards and investment banking. Its presence is not limited to Brazil, but rather widespread through Latin America. Over the next few years, the company could become a regional giant, expanding through strategic acquisitions; one thing is sure, Itau Unibanco Holding SA (ADR) (NYSE:ITUB) has the money to support this strategy. Diversification in its product portfolio is also expected to drive top-line growth over the next few years.

Although many investors are concerned about inflation and currency depreciation in Latin America impacting Itau Unibanco Holding SA (ADR) (NYSE:ITUB)’s income, its history suggests that the bank will be able to navigate such circumstances while remaining profitable and keeping a strong balance sheet. Moreover, profitability will be boosted by a decreasing risk in its loan portfolio.

Trading at less than 6 times its earnings, about half the industry average, while offering compelling growth prospects, strong capitalization and liquidity, and increasing returns, I’d recommend buying this stock for the long-term; the upside potential is wide, but so is the safety margin.

Forget about Rio Tinto

Although many analysts recommend staying away from the mining sector at the moment, Vale — a Brazilian company that holds the most valuable iron ore franchise in world — deserves a closer look. Despite being a diversified mining enterprise, its focus is clearly set on its iron ore business, which contributes with 70% of sales and 90% of EBITDA. Going forward, management will allocate most of its resources at maximizing the value of the firm´s iron ore assets. As a result, analysts expect average annual EPS growth rate of 21%-22% over the next five years, comfortably outperforming its peers (Zacks Estimate).

However, Vale SA (ADR) (NYSE:VALE)’s subsidiary business segments are also important and deserve to be mentioned. The firm is the second largest nickel producer in the world and holds other mining assets, like coal, that have been registering consistent increases in production.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!