Top 10 Latin America Stocks 2022

Top 10 Latin America Stocks 2022

UPDATED Mar 28, 2024

  • Emerging market investments offer investors an opportunity to diversify their portfolio into companies based in rapidly growing economies. Emerging markets have younger, growing populations, and emerging middle classes with disposable income.
  • Emerging market investments offer higher growth potential than those in developed markets - but also come with greater risks. These risks include the potential for political and economic instability, and lower standards of governance, transparency and regulation. These risks can be mitigated through diversification.
  • The major investment opportunities are in companies exposed to the growing middle class, infrastructure development, and commodity exports. This collection includes companies in relevant sectors with preference given to companies that operate in several countries in Latin America.

10 companies

MercadoLibre, Inc. operates online commerce platforms in the United States.

Why MELI?

Latin America’s eCommerce, fintech and advertising leader.

  • Mercado Libre operates South America’s largest online marketplace and related services. The company is based in Argentina, but operates across 18 countries in South and Central America.
  • To complement the marketplace, Mercado Libre provides on and off-platform payment services through its Mercado Pago arm, logistics and web store services through Mercado Envios, digital advertising, credit for merchants and buyers through Mercado Credito, and classifieds.
  • Mercado Libre finds strength in connecting small businesses with a population of over 650 million people, helping entrepreneurs overcome cultural or geographic barriers to success.
  • As Latin America’s economy continues to develop, eCommerce platforms like Mercado Libre should benefit as households will have more disposable income to participate in the online marketplace and expenditure on discretionary items will rise.
  • Online exposure for merchants means that new brands can penetrate deeper into the Latin American market as their shopfront will become more accessible.
  • Diverse product offerings allow success in one area of the business to power growth in other areas of the business.
  • With all these business segments, the company combines aspects of Amazon, PayPal, Square, Shopify and Affirm in one company.
  • Mercado Libre’s revenue growth averaged 53% a year in the five years to 2022.

Rewards

  • Earnings are forecast to grow 26.34% per year

  • Earnings grew by 104.8% over the past year

Risks

No risks detected for MELI from our risks checks.

View all Risks and Rewards

Vale S.A., together with its subsidiaries, produces and sells iron ore and iron ore pellets for use as raw materials in steelmaking in Brazil and internationally.

Why VALE?

The world’s largest iron ore producer.

  • Vale is a diversified miner and Brazil’s second most valuable company. Besides being the world’s top iron ore producer (at 320 million tonnes a year), Vale is also the second largest nickel producer in the world (at 167 million tonnes a year). Vale also produces manganese, ferro-alloys, copper, bauxite, potash, kaolin, and cobalt.
  • Commodities like iron ore allow countries to build infrastructure and generate valuable revenues and foreign currency flows. This is super important in emerging markets as urban areas typically undergo rapid expansion as more people will gravitate towards urban living, and so the demand for Vale’s iron ore will surge within the Latin American market.
  • Vale’s exposure to in-demand commodities like Nickel and Copper have been a boon for their top line and they’ve enjoyed appreciable increases in spot pricing for both commodities, especially the former, which has seen spot prices rise over 33% in the last 12 months. Vale has been quick to respond, as they’ve ramped up Nickel production 51% on a quarter to quarter basis and likewise, Copper production has increased 33% over the quarter.
  • It can be said that Vale will help power the global energy transition. Each electric vehicle requires 40-60kg of Nickel and each DC fast charger used to power these vehicles requires 25kg Copper. Copper is also invaluable to the solar industry, as 4.6 tonnes of copper is required per MW in solar systems.
  • Vale’s revenue growth averaged 25% a year in the five years to 2022 and it ended the period with a 43% operating margin.

Rewards

  • Price-To-Earnings ratio (6.5x) is below the US market (17.2x)

Risks

  • Profit margins (19.2%) are lower than last year (38%)

View all Risks and Rewards

Grupo SBF S.A. engages in the retail and wholesale of sports and leisure products in Brazil.

Why SBFG3?

Capitalizing on Brazil’s passion for sport.

  • Sporting goods and apparel is one of the fastest growing consumer goods segments around the world, and particularly in countries with an emerging consumer class. Grupo SBF owns and operates Centauro, Latin America’s largest chain of sporting goods retail stores.
  • The company also owns various other sport related businesses. These include Fisia, the exclusive distributor of Nike products in Brazil, the leading digital sports network and FitDance - an exercise/dance business. Nike is the most remembered brand by Brazilian consumers and so Grupo SF having exclusivity over its distribution in Brazil is a key advantage it holds over its competitors.
  • Sports form an integral part of the Brazilian cultural identity. If you consider Brazilian cultural icons, you’ll find that many of them like Pele, Ayrton Senna, Ronaldo Nazario and Helio Gracie arose from the country’s intense love of sport. This fact plays into Grupo SBF’s hands particularly as we head towards the end of the 2022 FIFA World Cup. The official teamwear were many Brazilians will be showing their support for the national team by wearing the team’s colors. In the first 10 weeks of the newest jerseys being available, they’ve already sold more than 50% greater volumes compared to the previous 2018 world cup period.
  • A growing middle class bodes well for Grupo SBF as it means access to online web stores increases as access to mobile and computers increase. The company will also experience some organic growth as people who aren’t located near brick and mortar stores now become part of the addressable market.
  • Grupo SBF’s net profit margin of 9.5% has allowed it to generate good returns on capital.

Rewards

  • Earnings are forecast to grow 29.99% per year

Risks

  • Volatile share price over the past 3 months

View all Risks and Rewards

Petróleo Brasileiro S.A. - Petrobras explores, produces, and sells oil and gas in Brazil and internationally.

Why PETR4?

South America’s energy giant.

  • Although the world is moving toward renewable energy, oil and gas are still the life blood of growing economies. As we’ve seen recently with the European energy crisis following sanctions on Russia, we aren’t able to switch off oil and gas in an instant. It’ll be a slow transition over the next few decades. Until then, oil and gas will continue to play a vital role in global economies.
  • Petrobras is the most valuable company in Brazil and the 7th largest oil producer in the world. It is an integrated oil company and operates throughout the supply chain, including exploration, extraction, refining and distribution.
  • The company is a leader in deep water exploration and extraction, processing oil shale, and producing biodiesel. Petrobras also distributes natural gas products and uses it to generate electricity in Brazil.
  • Like most Oil companies, Petrobras has enjoyed a period of strong financial performance owing to elevated oil prices. Since Q3 2021, the company has seen the price of Brent crude oil climb 37.3% and the prices of domestic basic oil by-products rise by an even more impressive 63.6% over the same period. This has been a boon for shareholders who have seen net income for the 9 months of 2022 grow by 99.3% compared to the first 9 months of 2021. However, when looking quarter to quarter, Petrobras saw a decline compared to Q2 2022 despite higher production volumes due to oil prices curtailing.
  • Petrobras has also been able to take advantage of new global opportunities following Russia’s diversion of European supply to China, ramping up exports to the Eurozone, as well as Latin America and the United States.
  • Growing economies have growing energy demands, and the next few decades of growth in Latin American economies will inevitably result in higher demands in oil, gas and its useful by-products; leaving Petrobras in a great position to meet that demand and reap the associated benefits (provided we haven’t turned away from fossil fuel usage).

Rewards

  • Trading at 22.4% below our estimate of its fair value

Risks

  • Earnings are forecast to decline by an average of 10.2% per year for the next 3 years

View all Risks and Rewards

Sociedad Química y Minera de Chile S.A. produces and distributes specialty plant nutrients, iodine derivatives, lithium derivatives, potassium chloride and sulfate, industrial chemicals, and other products and services.

Why SQM?

One of the top lithium producers in the world with a strong pipeline.

  • Lithium, a key component of rechargeable batteries, is one of the most important metals of the 21st century. Regulatory changes around the world in support of electric vehicles will ensure ongoing demand for lithium, a relatively rare metal with isolated deposits.
  • Chile is one of very few countries in the world with those lithium deposits, and SQM is the largest producer in the country. The bulk of SQM’s profits come from lithium, but the company is also an important producer of iodine, fertilizers and industrial chemicals.
  • The last 12 months have been huge for the company, thanks to growth across the board in commodity prices, namely the lithium segment of the business. Both the top and bottom lines have grown multiples with revenue up 347%, gross profits up 626% and net income up 937% since the third quarter last year.
  • Heightened lithium prices have been the driving force behind strong financial performance. A surge in demand and a shortfall in supply have resulted in lithium prices reaching all time highs. SQM’s average sale price in Q3 of 2021 was US$8,000 per tonne. Just 1 year later, that has soared to $56,000 per tonne. While rising lithium prices have played a huge part in this, it must be said that part of this is attributable to old pricing contracts expiring, opening the door for SQM to negotiate new contracts at far greater prices. Current spot prices for battery-grade 99.5% Lithium Carbonate is ~$82,000 per tonne.
  • In an attempt to meet the lithium demand growth, SQM has a number of projects in the pipeline that it expects to finalize over the next few years. These new projects are headlined by the Antofagasta Carmen Lithium plant capacity doubling its production output. It should also be noted that in 2023, the Sichuan plant in China will kick start its Lithium Hydroxide refining and the new Kwinana refinery in Australia is expected to follow suit in 2024.

Rewards

  • Trading at 50% below our estimate of its fair value

  • Earnings are forecast to grow 8.46% per year

Risks

  • High level of non-cash earnings

View all Risks and Rewards

Enel Américas S.A., together with its subsidiaries, generates and distributes electricity in Argentina, Brazil, Colombia, Peru, Costa Rica, Guatemala, and Panama.

Why ENELAM?

Generating electricity across Latin America.

  • Growing economies have a growing appetite for electricity. Enel Americas operates 15,965 MW of installed generation and distribution capacity in eight countries in South and Central America.
  • The company is based in Chile and is 82% owned by the Italian energy giant Enel SpA. Besides Chile, the company operates in most of the major economies of Latin America, including Brazil, Argentina and Peru.
  • Enel has been forward thinking in its approach to its generation portfolio, having achieved 71% of its total electricity generation from renewable sources. Hydro-electric generators form the largest component of the generation portfolio at 44%, Wind & Solar combine to achieve a further 27% of the generation capacity followed by Combined Cycle Gas Turbines at 15%, Oil-gas generation at 13% and coal at 1%.
  • Upon the recent sale of its Fortaleza assets, Enel America is now providing Brazil with 100% renewable energy. This is the first in what Enel Americas hopes to be a long line of Latin American countries shifting their generation portfolios to 100% renewable sources.
  • With 383 MW added year-to-date and a renewable pipeline of over 373,000 MW, Enel Americas should see appreciable growth over the years as growing electricity needs are met with changing government regulations to result in a huge demand increase for renewables in Latin America.

Rewards

  • Earnings are forecast to grow 14.35% per year

  • Became profitable this year

Risks

  • Large one-off items impacting financial results

View all Risks and Rewards

Cencosud S.A., together with its subsidiaries, operates as a retailer in Latin America.

Why CENCOSUD?

A retail giant operating across the five largest economies in South America.

  • Cencosud is the largest retail company in Chile and the third largest listed retail company in Latin America. The group operates 1045 stores in Chile, Brazil, Argentina, Columbia and Peru.
  • The group’s stores include hypermarkets, supermarkets, hardware and upscale department stores.
  • Cencosud has also branched into financial services and is able to offer consumers its own credit cards, a valuable segment to capture as electronic banking becomes more common.
  • As Latin America’s economies continue to develop, a larger percentage of the population will be in the financial position to interact with Cencosud’s retail chains. Particularly on the upscale retail side of the business. Greater disposable income among the addressable market will generally lead to continued organic growth.
  • Cencosud has managed to generate reliable cash flows, and has generated a 13% return on capital employed. In addition, the share has a 5.6% dividend yield.

Rewards

  • Trading at 73.1% below our estimate of its fair value

  • Earnings are forecast to grow 30.94% per year

Risks

  • Profit margins (1.5%) are lower than last year (2.4%)

  • Volatile share price over the past 3 months

  • Has a high level of debt

View all Risks and Rewards

Coca-Cola FEMSA, S.A.B. de C.V., a franchise bottler, produces, markets, sells, and distributes Coca-Cola trademark beverages.

Why KOF?

The largest independent Coca Cola bottler in the world.

  • Coca-Cola FEMSA bottles and distributes Coca Cola products in Mexico. Coca Cola owns 27% of the company and Mexico’s largest beverage and retail company Femsa owns 47%. This leaves 26% available for external investors.
  • As of 2019, Mexico had the highest consumption of soft drinks per capita in the world, so it isn’t surprising that the company is the largest franchise bottler in the world.
  • While not particularly expensive, soft drinks are a discretionary item that don’t appear in many shopping lists among lower development economies, where necessities and agricultural food items form a larger part of household expenditure. As supermarket chains replace farmers’ markets in regional communities and average income grows, Coca-Cola should see a surge in sales.
  • Coca Cola FEMSA has a steady net profit margin of 8%, allowing it to pay dividends yielding 4.9%.

Rewards

  • Trading at 16.3% below our estimate of its fair value

  • Earnings are forecast to grow 9.7% per year

  • Earnings have grown 14.9% per year over the past 5 years

Risks

No risks detected for KOF from our risks checks.

View all Risks and Rewards

Credicorp Ltd. provides various financial, insurance, and health services and products primarily in Peru and internationally.

Why BAP?

Financial services company reaping the benefits of a growing middle class.

  • Credicorp is a financial services holding company based in Peru The company owns banks and other financial services companies in Peru, Chile, Bolivia, Panama and Columbia. The group employs 36,000 people and has 20 million clients.
  • Credicorp’s companies provide traditional banking, insurance, and wealth management services to the upper and middle income segments. It also owns Mibanco, a microfinance company which allows it to provide services to market segments missed by traditional banks.
  • A growing middle class is a key marker of an emerging economy and is an extremely important customer segment for Credicorp, who will rely on their deposits, loans, insurance premiums and wealth management fees to continue turning a profit.
  • Emerging markets have recently latched on to digital banking as trust in financial institutions rise and the convenience of digital transactions provides a huge benefit over traditional cash transactions. Typically, emerging economies tend to have a larger youth population due to accelerating population growth and so we should expect to see engagement with financial institutions like Credicorp rise as the younger generation who have more trust in digital banking become the largest demographic.
  • The group is conservatively managed and has a strong balance sheet. Furthermore it pays a 2.6% dividend.

Rewards

  • Trading at 28.7% below our estimate of its fair value

  • Earnings are forecast to grow 10.32% per year

  • Earnings grew by 4.7% over the past year

Risks

No risks detected for BAP from our risks checks.

View all Risks and Rewards

Grupo México, S.A.B. de C.V. engages in copper production, cargo transportation, and infrastructure businesses worldwide.

Why GMEXICO B?

Infrastructure giant leveraging Mexico’s economic growth.

  • Mexico’s economic growth has outpaced many developed nations over the past decade. As countries industrialize they require raw materials, infrastructure, power, and transport services.
  • Grupo México is a conglomerate involved in mining, transportation and infrastructure development.
  • The company’s mining division owns copper, silver and gold mines, mostly in Mexico, but also in the US, South America and Spain.
  • The transportation division owns and operates Mexico’s largest rail fleet and 11,000 kms of rail tracks.
  • The infrastructure division provides engineering and land and oceans drilling services, and power generation facilities (combined gas and steam plants and wind farms).
  • As of 2022 Grupo México had a very high dividend yield of 9.1%, though the yield has fluctuated from year to year in the past.

Rewards

  • Trading at 2.7% below our estimate of its fair value

  • Earnings grew by 8% over the past year

Risks

  • Volatile share price over the past 3 months

View all Risks and Rewards

Simply Wall St analyst Richard Bowman and Simply Wall St have no position in any of the companies mentioned.

Simply Wall Street Pty Ltd (ACN 600 056 611), is a Corporate Authorised Representative (Authorised Representative Number: 467183) of Sanlam Private Wealth Pty Ltd (AFSL No. 337927). Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situation or needs. You should not rely on any advice and/or information contained in this website and before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice. Please read our Financial Services Guide before deciding whether to obtain financial services from us.