NEW YORK (
-- 2010 has been very kind to Latin America with GDP growth of 6.3% year-to-date.
In 2009, the MSCI Latin America index had a total return of 103.8%, the best of all the equity asset classes. Jeff Applegate, Chief Investment Officer at Morgan Stanley Smith Barney, says the 2011 outlook for emerging markets is even better.
The asset allocation team at Morgan Stanley is currently overweight on emerging markets, stating that it is their most-favored asset class because: "These countries continue to lead the global economic recovery. They generally have cleaner government balance sheets, their equity market valuations are attractive and many of their currencies are likely to appreciate."
While this year's performance doesn't necessarily line stocks in the region up to be 2011's top performers, many of these names are highly favored by analysts to continue their upward trajectory.
Small jet builder
rose almot 37% for the past 12 months and the company continues to deliver positive guidance.
Credit Suisse analyst Luiz Campos gives the stock an outperform rating with a target price of $37.00. Campos thinks the company has become more efficient and less labor intensive. While he points to sales being 3% below his estimates, the net income was 107% above his estimate.
Campos also wrote, "further upward revision of Ebit
earnings before interest and taxes guidance and maintenance of the top-line forecast should indicate a strong 4Q10 ahead." TheStreet Ratings designates the stock as a buy and notes that the gross profit margin for the third quarter 2010 increased over the previous year and that the stock is trading at a discount to its peers.
jumped 42% for the past 12 months, but that doesn't meant the Ambev rally is going to go flat.
Deutsche Bank analyst Jose Yordan doesn't see a glass ceiling on the stock's price. He recently raised his target price from $148 from $137, citing his belief that the company is at the beginning of a multi-year secular trend of increasing market share gains.
In a Nov. 13 research note, Yordan wrote: "We also believe that AmBev will continue to sharply increase its dividend payout over the next 12 months." Yordan sees some risk from increased competition or currency fluctuations, but it's not enough to change his long term positive view. HSBC analyst Lauren Torres also gives AmBev an overweight rating and raised her target price from $169 from $147. She sees continued momentum going into 2011.
Brazil's largest petrochemical producer
delivered a plus 50% return for the past 12 months. Braskem is investing $100 million in propylene production, which is used in food containers and water bottles. The plastic comes from a sugar-based ethanol.
In the first nine months of 2010, the company's net revenue grew 31%. The company is focused on getting an investment grade rating from the rating agencies. Debt was reduced by 9% by the end of the third quarter. Itau Securities analyst Paula Kovarsky has an outperform rating and a 12-month price target of $22.10.
TAM Linhas Aereas
is another air transportation company whose stock is flying, delivering a plus 57% performance for the past year. Credit Suisse analyst Luiz Campos remains bullish with an outperform rating on the stock with a 12-month price target of $50.
Tam recently reported strong third-quarter results because of a reduction in costs as well as a reversal of a tariff provision. Campos knew the tariff reversal was coming, but was surprised at TAM's ability to cut costs as much as it had. The company is on track to finalize its deal with Lan in the second quarter of 2011. The conclusion of the deal should be a major catalyst for the stock.
Shares of Brazilian sugar producer
have had a sweet year, gaining more than 58% over the past 12 months.
The company is one of the world's largest producers of sugar and ethanol. Although it recently guided down on sugar volumes due to adverse weather, Cosan's net earnings for the second quarter of 2011 were up 20% year over year.
Itau Securities analyst Paula Kovarsky has a market perform rating on the stock and a 12-month price target of $17.40. Cosan has also formalized a $12 billion joint venture between it and
( RDS), signaling energy potential in the future.
--Written by Debra Borchardt in New York.
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