I am retired and take educated guesses on all things financial.

February 28, 2010

February 28, 2010: Chile, No Cause To Tremor.

The devastation of wide areas within Chile may give investors pause. The Bolsa de Commercio de Santiago will likely expect some selling pressure as the country sorts out the damage from the powerful earthquake Saturday. As the market has been one of the best performers in thew world over the past year, this expected pullback may give investors an opportunity to selectively enter and wait for this resilient country to come back.

Fortunately, Chile has positive investing attributes such as almost nil corruption compared to Latin American neighbors, a liberal capital market, free trade policies. low debt (which will be of benefit during the current crisis) and a democratically elected conservative government leader in Sebastian Pinera.

Investors may wish to closely follow, and buy on dips, the Chile Fund,Inc.(CH) which traded at $18.05 on Friday, with a 52-week trading range of $9.66-19.66/share and the iShares Chile ETF (ECH) which traded at $56.75 on Friday, with a 52-week trading range of $30.02-60.94/share. Utilities, materials and industrial stocks make up the lion's share of holdings.

I believe that the following Chilean ADRs are worth looking at for purchase on dips:

Sociedad Quimica y Minera de Chile (SQM): Trading at $36.55 with a 52-week trading range of $22.61-43.93/ADR share, SQM is a leading producer of fertilizers and speciality chemicals in Chile. Average daily volume for the past ten days was over 685,000 shares. It has a yield of a little over 2.00%.

Vina Concho y Toro (VC0): Trading at $47.00 with a 52-week trading range of $29.82-50.89/ADR share, very thinly traded VCO is one of the leading wine producers in the world. It has a yield of approximately 0.90%. This stock may be quite volatile.

Compania Cervecerias Unidas (CCU): Trading at $38.68 with a 52-week trading range of $25.93-42.89/ADR share, CCU is somewhat thinly traded. This company is a leading producer and licensee of beer, wine, water and soft drinks in Chile and Argentina. It's most well-known license is Heineken, which it produces regionally. CCU yields 3.15%.

Due to prospective property damage claims and an impaired infrastructure, I would avoid individual financial and power-generating and supply company stocks for now until further information is made available. If you disagree, the two funds above contain these and other sectors within their portfolios.

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