Davos Elites See Opportunity in Latin America and Africa: Wal-Mart Stores, Inc. (WMT), Fastenal Company (FAST)

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Davos is the location of the annual meeting of the World Economic Forum. It’s supposedly where the world’s best and brightest share ideas. One idea that has percolated to the top at this year’s event is that the next big growth stories will be Latin America and Africa. There are some relatively safe ways to get access to these regions that you may not realize.


Once a year the World Economic Forum holds a meeting in Davos, Switzerland. The world’s richest, most famous, and smartest people make a big scene about their attendance and the media, almost predictably, follows along with accolades. How much actually gets done in Davos is hard to quantify, but it certainly is a circus.

One of the ideas that came from this year’s big event is that the next big emerging market stories will be Africa and Latin America. Being that there aren’t too many more regions in the world that haven’t yet been the big growth story, this bit of news doesn’t seem like that big a deal. However, the nod from the Davos meeting does merit some review.

Ways to Play

Interestingly, some relatively large companies that trade on the U.S. exchanges have been expanding in Africa or Latin America, and, in some cases, both areas. This means that investors can take part in these “hot” new developing regions without taking on too much additional risk.

Earnings Analysis: Wal-Mart Stores Inc. (NYSE:WMT)Wal-Mart Stores, Inc. (NYSE:WMT)

Wal-Mart, for example, has exposure to both Africa and Latin America. In 2011, the company paid $2.4 billion to gain a controlling stake in South Africa’s Massmart. Like Wal-Mart, that company operates in the discount space. Doug McMillon, the president and CEO of Wal-Mart’s international division, told Reuters that “Building our business in the markets that we are currently in is our primary focus.”

However, he has also expressed that the company is taking a long-term view of the region. A relatively slow approach probably makes sense, since Wal-Mart will have to get used to operating in Africa and Africa will have to get used to operating the “Wal-Mart way.” Known for its ruthless efficiency, Wal-Mart would clearly be better served having a solid foundation for growth in place instead of building out a presence with a foundation that crumbles under strain and makes the company look bad.

Wal-Mart also has a material presence in Latin America, with locations in such countries as Argentina, Brazil, Chile, Costa Rica, El Salvador, and Nicaragua. At the end of fiscal 2012, the company’s store count in Mexico accounted for a little over a third of its total international store count. There’s little doubt that this nation, above all others, is key to the company current performance. However, a growing presence in the rest of Latin America will be important for long-term growth.

Fastenal Company (NASDAQ:FAST)

Founded in the late 1960s, Fastenal sells industrial and construction supplies to wholesale and retail customers domestically and internationally. At the end of 2011, the company had over 2,500 stores selling products from 11 different product lines. North America makes up the vast majority of its business. Management believes this market can support about 3,500 stores, but has not yet made any projections for its international growth potential, which is likely to be material based on a currently limited foreign presence.

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