Experienced travelers to Mexico know, “don’t drink the local water and don’t eat uncooked food washed with the local water”, or Montezuma will take his revenge once again. But what about investing in Mexican companies, is this to be avoided as well?
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Wealthy families and large landowners have always controlled Mexico, and it is commonly said 300 families control all of Mexico. But for the first time in history in 2000, an opposition candidate, Vicente Fox, was peacefully elected as President of Mexico.
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Historians will probably write, “even though Vicent Fox did not accomplish very much of what he wanted to accomplish, at least he didn’t do a lot of harm.”
Mexico hasn’t benefited much from NAFTA (North American Free Trade Agreement), which went into effect in 1994. Trade with Mexico has increase substantially since the implementation of NAFTA but the overall economic impact for Mexico, although positive, has been very small. The main benefactor of NAFTA for Mexico has been the “maquiladora”, a factory importing duty-free materials for assembly/manufacture and then exporting the finished product.
A recent bright spot for Mexico has been “nearshoring”, which is similar to “offshoring”. In offshoring companies move jobs out of the United States in order to take advantage of cheaper labor pools, usually to the other side of the world, Asia, etc. Nearshoring is similar to offshoring, but companies seek cheaper labor pools closer to home, like Nova Scotia, Costa Rica or Mexico [for more information on nearshoring see (siliconvalley.com/mld/siliconvalley/16785898.htm) ].
Some Mexican companies with optionable stocks are shown below.
|Mexican Companies with Optionable Stocks|
While investing in Mexico may not be as safe as investing in Japan (see “Land of the Rising Sun is Looking Up” ) maybe investing in covered calls for some Mexican companies might be worthy of some consideration.
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|AMX||43.58 (-0.20)||AMXDI||07 APR 45.0 (38)||1.15||2.6||2.7||6.1|
|CX||32.21 (-0.54)||CXDF||07 APR 30.0 (38)||2.90||9.0||2.4||2.4|
|TV||27.71 (-0.06)||TVGF||07 JUL 30.0 (129)||1.20||4.3||4.5||13.2|
|HXM||52.87 (-0.08)||HXMDK||07 APR 55.0 (38)||1.45||2.7||2.8||7.0|
|HXM||52.87 (-0.08)||HXMDJ||07 APR 50.0 (38)||4.00||7.6||2.3||2.3|
|TMX||29.39 (-0.21)||TMXDF||07 APR 30.0 (38)||0.75||2.6||2.6||4.7|
Two of the covered calls stock options positions found are in-the-money, CX and the second HXM, with potential returns of 2.4% and 2.3% (38 days), respectively. These positions also have downside protection of 9% and 7.5%, allowing for the stock price of these companies to decrease significantly before sustaining a loss.
The remaining positions are out-of-the-money with potential % if assigned returns ranging from 4.7% to 13.2%. These positions require the price of the stock to increase in order to realize the maximum return.
Generally, in-the-money covered calls stock options positions have larger downside protection at the expense of less potential return and out-of-the-money covered calls positions have larger potential returns at the expense of less downside protection.
The in-the-money/out-of-the-money tradeoff allows investors to tailor their investments according to their own personal risk/reward profile.
Competitors for AMX include: Grupo Iusacell, S.A. de C.V. (private), NII Holdings, Inc. (private), and TelefÃ³nica MÃ³viles, S.A. (private).
Competitors for CX include: Lafarge SA (LR), HeidelbergCement AG (private), US Concrete Inc. (RMIX), and Texas Industries Inc. (TXI).
Competitors for TV include: Cisneros Group of Companies (private), Telemundo Communications Group, Inc. (private), and TV Azteca, S.A. de C.V. (private).
Competitors for HMX include: Oxford Industries Inc. (OXM), Phillips-Van Heusen Corp. (PVH), and Polo Ralph Lauren Corp. (RL).
Competitors for TMX include: and Grupo Iusacell, S.A. de C.V. (private).
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[tags] Mexico, Mexican, Vicente Fox, NAFTA, maquiladora, Nova Scotia, Costa Rica, Grupo Iusacell, S.A. de C.V., NII Holdings, Inc., TelefÃ³nica MÃ³viles, S.A., HeidelbergCement AG, Cisneros Group of Companies, Telemundo Communications Group, Inc., TV Azteca, S.A. de C.V., OXM, Oxford Indus. Inc., PVH, Phillips-Van Heusen Corp., RL, Polo Ralph Lauren Corp, RMIX, US Concrete Inc., TXI, Texas Industries Inc., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]