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

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

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!