Best Mexican Stocks for Cinco de Mayo

China is now home to the world’s third-largest soft drink market in terms of volume, after the US and Mexico.

— Yiannis Mostrous, Cocktail Stocks

Mexico faces serious problems from its murderous drug cartels who effectively control large swaths of the country, but the fact remains that the Mexican economy is the 12th largest in the world and grew 5% in real terms last year. It accounts for 12% of U.S. imports and 5% of Canadian imports. It also is the home of Carlos Slim Helu, the world’s richest man with a $74 billion fortune. Brazilian mining billionaire Eike Batista boasts that he will surpass Carlos Slim soon, but I doubt it. Batista only has a pitiful $27 billion fortune. What a loser.

Being the hedonist that I am, the thing I most appreciate about Mexico is that it brought us the Cinco de Mayo holiday. On May 5, 1862 a small and ill-equipped group of Mexicans defeated a much-larger invasion force of 8,000 French soldiers. Apparently, the Mexican government had defaulted on a large debt owed to the French imperial government of Napoleon III. Waging war to collect a debt isn’t the best motivation and the French army paid the price.

Ironically, Cinco de Mayo is more widely celebrated in the United States than in Mexico. Mexicans care much more about September 16th, which commemorates their independence from Spain in 1810. Mexicans probably “dis” Cinco de Mayo because the 1862 French defeat at the hands of Mexico was only temporary; the French army returned with an overwhelming force of 30,000 soldiers that succeeded in conquering Mexico. Oh well. But the delay in conquering Mexico was important for the Union army in the United States.

Remember, May 1862 was right in the middle of the U.S. Civil War. The decisive battle of Gettysburg that turned the war in favor of the Union would not occur for 14 more months. France was planning on supplying the Confederate army via Mexico. If the Mexicans had not delayed the French conquest by several months, the Confederate army might have received critical supplies that prevented President Lincoln and the North from winning. For this reason, Cinco de Mayo is more important to the subsequent history of the United States than of Mexico.

In the U.S., Cinco de Mayo is celebrated primarily by drinking margaritas and Corona beer. In a way, it is the Mexican version of St. Patrick’s Day. So, to commemorate the day, I present you below with some of the best Mexican stocks I could find.

It’s only fitting to start with Mexico’s largest landline telephone company, which was founded by Carlos Slim. His family is still the largest shareholder with a 59.4% controlling interest. The stock pays a nice 4.8% annual dividend, but its growth prospects are limited.

Another Carlos Slim company, this wireless telecom powerhouse was spun off from Telmex in 2001 and now is the vehicle by which Slim owns his 59.4% interest in Telmex. America Movil controls 70% of the Mexican wireless market and is the real growth company in Mexico’s telecom space. The stock has suffered recently because Mexican telecom regulators are forcing it to cut the interconnection rates it charges competing wireless networks by more than half. Still, I like America’s Movil’s long-term growth prospects.

Consumer conglomerate with three divisions: (1) a controlling 54% interest in joint venture Coca-Cola FEMSA (NYSE: KOF); (2) a chain of OXXO convenience stores; and (3) a 20% interest in Dutch global beer giant Heineken (Other OTC: HINKY.PK). First-quarter earnings were up more than 10% and it looks like 2011 will be another good year.

Largest TV broadcaster in Mexico with four of Mexico City’s 10 TV stations and a 70% market share of the prime-time audience. Last October, the company paid $1.2 billion for a 35% interest in New York-based Spanish language media company Univision. Also owns controlling stakes in cable TV and satellite TV companies.

Largest producer of cement in the world. Highly exposed to residential construction, which is very weak right now. Largest market is Europe, which accounts for 34% of annual revenue. The company is highly leveraged because of two badly-timed acqusitions prior to the housing bust: (1) $5.8 billion for Britain’s RMC Group in 2005; and (2) $14.2 billion for Australia’s Rinker Group in 2007. If housing ever comes back, Cemex should do well.

Elliott Gue, co-editor of Cocktail Stocks loves to look for catalysts; in fact, they are one of Elliott’s favorite buy triggers.  As he wrote in an advisor roundtable:

When researching growth-oriented companies I look for catalysts. There’s no point in buying or selling a stock that’s just going to trade sideways or follow the broader market in lockstep.

The depreciation of the U.S. dollar is a type of catalyst that can boost the capital-appreciation prospects of companies in foreign countries like Mexico. If you are looking for a short-term trading service that can spice up your investment returns with some quick winners in three to nine months’ time, Cocktail Stocks is just what the doctor ordered.

Right now, Elliott Gue and co-editor Yiannis Mostrous are recommending six stocks – including a Latin American growth rocket — primed to deliver double-digit gains quickly. They recently recommended shorting an index primed to fall. To find out the names of their latest picks, give Cocktail Stocks a try today!

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