Filed Under: ,
Tickers in this Article: EWW, AMX, CX, TV
A strong U.S. Dollar has meant importers of U.S. goods like Mexico have to contend with higher prices in addition to the availability of credit. This year Mexico imported $139 billion worth of U.S. goods representing a 7% increase over 2007.

The soft U.S. dollar that helped boost trade last year has hardened, and stocks tracked by the iShares MSCI Mexico Investable Market Index (AMEX:EWW) have fallen in response. Investors debating whether to include companies from south of the U.S. border in their portfolio should consider how a sample of EWW's top holdings have responded to the strengthening dollar. (Be sure to check out Revive Your Portfolio.)

Wireless Provider
America Movil S.A.B. de C.V. (NYSE:AMX) makes up just over 25% of EWW as of October 31. The wireless provider has managed to raise its subscriber base by 7.3 million subscribers for the third quarter for a total 172.6 million subscribers at the end of September. Strong subscriber growth from Brazil, Mexico and Columbia has led the way. With 13.3% of its revenue denominated in U.S. dollars, America Movil uses currency hedges in the form of forward contracts to mitigate its exposure to a strengthening U.S. dollar. America Movil generated a net profit of $900 million (12.4 billion pesos) for the quarter representing a 31.6% increase over the same period a year ago.

Media Provider
The Spanish language media company Televisa (NYSE:TV) makes up 6.42% of EWW as of October 31. Televisa reported a 21% increase in net sales to $907 million (12.5 billion pesos) driven by growth in its Cable and Telecom, Television Broadcasting, Sky, Publishing and Pay Television network segments. Televisa did report a decrease in sales for programming exports due to negative translation effects of foreign-currency denominated sales. However, Televisa was able to offset a portion of the decreases by securing an increase in royalties received from Univision.

Infrastructure Provider
Building materials and cement provider Cemex S.A.B. de CV (NYSE:CX) made up 5.71% of EWW as of October 31. Cemex is currently trading below its book value with a closing price of $4.58 on November 19. Cemex reported a net sales decrease of 5% in the third quarter ending in September. Although net sales in Mexico increased 10% during the quarter to $1 billion, net sales in the U.S. fell 28% to $1.2 billion in comparison to the same period a year ago. (For more on this valuation, read Value By The Book.)

Final Thoughts
The EWW ETF has lost more than half of its value since the beginning of the year. A global economic recovery is probably a year or two away; however, EWW's top holdings mentioned above have proved they are able to grow their revenue despite the strengthening of the U.S. dollar. Diversification in any portfolio is critical. Given the current market volatility a dollar-cost averaging approach for investors with a 3-5 year time horizon should put risk adverse investors in the best position to profit.

To learn more, begin with 3 Steps To A Profitable ETF Portfolio.

comments powered by Disqus

Trading Center