This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Latin America ETF Mines Small-Caps

NEW YORK ( TheStreet) -- If you're one of the millions of investors who discovered emerging-market investing in the past decade, you know about the investment merits of Latin America. The region is resource-rich, a middle class is starting to emerge, and Brazil will host the 2014 World Cup and the 2016 Summer Olympics.

Digging deeper, many countries in Latin America have faster economic growth and less debt than the U.S. As a result, large-cap funds like iShares MSCI Brazil Index Fund (EWZ), iShares MSCI Mexico Index Fund (EWW) and the iShares S&P Latin America 40 Index Fund (ILF) have become popular. A few months ago, Van Eck ventured into small-cap Latin America investing with the Market Vectors Brazil Small Cap ETF (BZF), which has performed well and attracted assets. Now Van Eck is back again with the Latin America Small Cap Index ETF (LATM).

Brazil, the largest economy in Latin America, has the biggest representation in the new fund, at 42%, followed by Mexico, 23%, Canada, 19% (these are companies that derive at least 50% of their revenue in Latin America), and Chile, 10%. Those countries dominate the iShares S&P Latin America 40 Index Fund. The small-cap fund has little or no exposure in Peru, Colombia, Argentina and Paraguay. That those countries aren't included is unfortunate because they're becoming more globally relevant.

There are few familiar stocks in the fund. Pan American Silver (PAAS - Get Report), which is headquartered in Canada, has mines all over Latin America. TV Azteca is another. The fund has 81 holdings, charges a net expense ratio of 0.63% and the index underlying the fund yields 2.81%. Latin America Small Cap Index ETF is heaviest in materials, at 26% of assets, a little less than in the large-cap ETF from iShares.

The Latin America Small Cap Index ETF's second-largest sector is consumer discretionary, at 22%. It has almost no representation in the large-cap fund. The relevance here is that anyone purchasing the small-cap fund needs to buy into the ascending middle-class theme. Mining is making these countries wealthier and, thus, making mine workers wealthier. With increased income comes increased purchasing power, which should benefit consumer companies.

Emerging markets tend to be more volatile than the U.S. According to Market Vectors, the price-to-earnings ratio for the index is 31, which is high in nominal terms. While it's a good bet that Latin America will have better growth, it's crucial to understand the potential volatility and risks that go with high valuations.
At the time of publication, Roger Nusbaum had no holdings in the securities mentioned.

Nusbaum is a portfolio manager with Your Source Financial of Phoenix, 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.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
LATM $14.71 0.00%
BZF $15.03 0.00%
EWW $53.41 0.02%
EWZ $29.29 0.00%
ILF $26.88 -0.07%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs