Mexico Closed End Fund Stock Picks (Mid 2024)
Mexico Closed End Fund Stock Picks (Mid 2024)
Mexico stock picks or potential nearshoring stocks that are the holdings of Mexico closed-end funds Herzfeld Caribbean Basin Fund, Mexico Equity and Income Fund, and The Mexico Fund.
Last year, we did a post covering the key holdings of the Mexico closed end funds (Mexico Closed End Fund Stock Picks (Early 2023)) as a potential way to cash in on nearshoring or China plus one trends involving the country.
But as noted in our June 10th post, the recent Mexican elections have more or less cemented left-wing rule:
🇲🇽 Five challenges facing Mexico’s Claudia Sheinbaum (FT) $ 🗃️
Big budget deficit and record number of murders top the president-elect’s worries
The fiscal deficit
Organised crime and violence
Pemex’s parlous finances
Relationship with the US
Following López Obrador
🇲🇽 Mexico’s peso hit by election fallout as left-wing party cements its power (FT) $ 🗃️
Currency on track for the worst week since the start of pandemic as investors digest outcome of vote
“The reforms are worrying because they deteriorate the rule of law in the Mexico,” Siller said. “This could contaminate the real economy. Fear translates into caution, and business owners could now opt to pause investment projects.”
🇲🇽 Mexico’s elite struggles to comprehend left’s landslide election win (FT) $ 🗃️
Wealthy are out of touch with the majority of ordinary people, critics say
And as mentioned on Monday, there are now added uncertainties or concerns about the rule of law in the country:
🇲🇽 Mexico to launch ‘impossible’ process to elect 7,000 judges (FT) $ 🗃️
Voters to choose from vast candidate list following radical overhaul labelled an opportunity for organised crime
🇲🇽 Why Mexico’s Looming Judiciary Overhaul Spooks U.S. Business (WSJ) $ 🗃️
Billions of dollars in foreign-investment plans involving the U.S. and its biggest trading partner are on hold
At stake is another $18 billion in private investment that Mexico needs to cover rising electricity demand for industrial use. The Supreme Court blocked policy initiatives that could have disrupted Mexico’s electricity sector in violation of the United States-Mexico-Canada Agreement, but some investors fear a new, elected court would approve them.
Our August 1st 2023 post (among other posts) covered a podcast interview with a fund manager who talked about evidencing nearshoring (as its something everyone talks about, but still needed to be proven). He had gone to the Northern Mexico city of Monterrey and saw phenomenal growth e.g. the industrial warehouse sector there was 100% leased.
However, another Monkeywrench could be thrown into the nearshoring plans of certain eCommerce players as Zerohedge noted this week:
🇲🇽 "It Changes The Math": Biden's Tariff Crackdown Throws Amazon And Walmart's Sneaky China Plans Into Chaos (Zerohedge)
Meanwhile, some retailers have shifted warehouses to Canada or Mexico. From there, they can swiftly and legally ship items duty-free into the U.S. when orders roll in - taking more American jobs with them.
As the Biden administration tightens the screws on de minimis shipments from China, fears are mounting that imports from our neighbors might surge as companies look for new loopholes.
And its not like nobody has noticed how the Chinese and others are setting up warehouses or assembly centers in Mexico to take advantage of NAFTA’s successor and to avoid other tariffs or political complications involving China.
With that said, this post takes another closer look at all of the holdings for the following three Mexico focused closed-end funds:
Herzfeld Caribbean Basin Fund, Inc (NASDAQ: CUBA) - Inception: 1993/09/10
Price/Book (Most Recent Quarter): 0.72
Trailing P/E: 11.79 (no forward P/E) / Forward Annual Dividend Yield: 23.04% (Yahoo! Finance)
Mexico Equity and Income Fund (NYSE: MXE) - Inception: 1990/08/21
Price/Book (Most Recent Quarter): 0.60
Trailing P/E: 4.81 (no forward P/E) / Forward Annual Dividend Yield: 3.31% (Yahoo! Finance)
The Mexico Fund (NYSE: MXF) - Inception: 1981/06/03
Price/Book (Most Recent Quarter): 0.68
Trailing P/E: 6.70 (no forward P/E) / Forward Annual Dividend Yield: 5.76% (Yahoo! Finance)
Here is a look at the more recent performance of all three closed-end funds covering the COVID period (the charts are linked back to Yahoo! Finance):
And the long term performance of all three:
As you can see from the chart covering the pre-to-post COVID period, there has been a performance divergence for MXE and MXF that is probably explained by stock selection along with investment philosophy or strategy differences. However, CUBA is also invested US stocks (those that tend to be based in Florida or operate in the Caribbean e.g. the cruise ship lines, resort operators, etc.) or those based in other Caribbean basin countries.
We also have a list of Mexico ADRs on our website plus here is a screenshot of the list of Mexico ETFs from our website:
And here are the charts when we add the two non-leveraged Mexico ETFs:
The Mexican peso has been a bit more stable in recent years:
Aside from the recent political uncertainties, I would think the Peso should at least hold firm or strengthen over the longer term as Mexico continues to attract capital for nearshoring activities (along with remittances from Mexicans working in the USA or Americans living in Mexico).
With that in mind, here are some more key Mexican economic charts to consider:
More such economic charts are available when searching for Mexico on Trading Economics…
As for potential Mexico stock picks (that are also the holdings of CUBA, MXE and MXF) and to make your life easier, this post includes:
Which fund or funds own the stock as a holding.
A quick description of the stock holding with links to the IR page and stock quote(s) on Yahoo! Finance or Finviz (for US Listings).
A link to any Wikipedia page (for what it might be worth…)
A price/book (most recent quarter) ratio plus forward or trailing P/E and dividend yields linked back to the Yahoo! Finance statistics page.
The latest long term technical chart linked back to Yahoo! Finance.
And as always, this post is provided for informational purposes only (and to make your life easier by providing you with relevant information, links, and charts). It does not constitute investment advice and/or a recommendation…
Note: Although the full holdings lists on the fund websites or in their SEC filings are a bit dated, their holdings have probably not changed significantly when it comes to what has been completely sold off or new positions that have been opened in completely new stocks:
Herzfeld Caribbean Basin Fund, Inc - Monthly Portfolio Investments Report - Filing Date: 2024-08-29 (Reporting Date: 2024-06-30)
Mexico Equity and Income Fund - Portfolio Holdings As of recent Quarter End – June 30, 2024
The Mexico Fund - Monthly Portfolio Investments Report - Filing Date: 2024-09-11 (Reporting Date: 2024-07-31)
Mexico
Alfa SAB de CV
[The Mexico Fund]
Alfa SAB de CV (BMV: ALFAA) is involved in petrochemical and synthetic fiber, refrigerated food, and telecommunications businesses in Mexico. The Company manages the following businesses:
Sigma - Leading multinational food company, that produces, commercializes, and distributes cooked & fresh meats, dry meats, cheese, yogurt, other refrigerated, frozen and plant-based foods.
Alpek - Leading producer of PTA, PET, rPET & EPS in the Americas and polypropylene in Mexico. Operates companies in two business segments: Polyester and Plastics & Chemicals, in the Americas, Europe and the Middle East.
Price/Book (Most Recent Quarter): 2.47
Forward P/E: 8.10 / Forward Annual Dividend Yield: 4.00% (Yahoo! Finance)
Alpek SAB de CV
[Mexico Equity and Income Fund, Inc / The Mexico Fund]
Alpek SAB de CV (BMV: ALPEKA / FRA: 27A / OTCMKTS: ALPKF) is a leading producer of PTA, PET, rPET & EPS in the Americas and polypropylene in Mexico. Alpek operates companies in two business segments: Polyester and Plastics & Chemicals, in the Americas, Europe and the Middle East.
Price/Book (Most Recent Quarter): 0.96
Forward P/E: 15.22 / Forward Annual Dividend Yield: 8.92% (Yahoo! Finance)
Alsea SAB de CV
[Mexico Equity and Income Fund, Inc / The Mexico Fund]
Alsea SAB de CV (BMV: ALSEA / FRA: 4FU / OTCMKTS: ALSSF) is the leading restaurant operator in Latin America and Spain of global brands in the quick service, coffee shop (Starbucks), casual and family dining segments.
The Company has a diversified portfolio, with brands such as Domino’s Pizza, Starbucks, Burger King, Chili’s, P. F. Chang’s, Italianni's, The Cheesecake Factory, Vips, Vips Smart, El Portón, Archies, Foster’s Hollywood, Gino’s, TGI Fridays, Foster’s Hollywood Street, Ole Mole and Corazón. The company operates more than 4,000 units in Mexico, Spain, Argentina, Colombia, Chile, France, Portugal, Netherlands, Belgium, Luxembourg and Uruguay (See: Alsea (BMV: ALSEA / FRA: 4FU / OTCMKTS: ALSSF): Seeing Robust Starbucks and QSR Growth)
Price/Book (Most Recent Quarter): 6.13
Forward P/E: 10.54 / Forward Annual Dividend Yield: 2.28% (Yahoo! Finance)
America Movil SAB de CV
[Herzfeld Caribbean Basin Fund, Inc / Mexico Equity and Income Fund, Inc / The Mexico Fund]
America Movil SAB de CV (NYSE: AMX) is the 7th largest mobile network operator in terms of equity subscribers and a leading Latin America telecommunication service provider.
Price/Book (Most Recent Quarter): 2.39
Forward P/E: 9.29 / Forward Annual Dividend Yield: 3.16% (Yahoo! Finance)
