Copper's Glow Keeps Chile's Market Hot

Simple investment themes often are the better ones. But what happens when two simple investment themes converge? In the case of Chile, they add up to an intriguing thesis, and there are two ways to get exposure to it.

The public pension system in Chile means the appetite for the nation's equities is constant, if less than dramatic. This story is a nice sidebar to the major -- but still simple -- investment thesis of the world's need for resources, which has fattened copper-rich Chile's economy.

The Chilean market, including the closed-end fund and individual ADRs that can give you exposure to it, has moved up big already, so investing now requires a belief that global demand for copper will persist. I believe it will, and that in this case, "less" will become more for investors.

Riding a Tailwind

Let's go back to the first simple idea I see in a play for Chile, the dynamic of the public pension system. I recently wrote about the effect this has had in Austria. One of the reasons Austria is a desirable investment destination is that its public pension system invests funds in the Austrian stock market. This constant demand creates an easy-to-understand tailwind.

The other simple theme is the increased global demand for natural resources caused mostly by the modernization of the infrastructure in China and, to a lesser extent, India. There is visibility for this demand to continue to grow.

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At the time of publication, Nusbaum was long Banco Santander Chile for his personal and client accounts, although positions may change at any time.

Roger Nusbaum is a portfolio manager with Your Source Financial of Phoenix, Ariz., and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback; click here to send him an email.