From Harry Dent: We recently wrapped up our March edition of Boom & Bust and I’ve no doubt it’s going to create a stir. I discuss the controversial immigration issue and that’s possibly one of the quickest way to make enemies right now.
Still, the topic had to be covered because it has demographic implications (complications even) that we cannot ignore.
So, I took a deep dive into the immigration numbers to show readers the true nature of the situation. Then I handed the baton to Charles, the Boom & Bust Portfolio Manager, and told him to find an investment opportunity we can profit on based on the environment we currently find ourselves in.
He didn’t disappoint.
His immediate response to me was: “Well, President Trump is building a 2,000-mile wall along the Mexican border… and wants Mexico to pay for it… so I guess it’s time to buy Mexican cement stocks.”
He was joking. Sort of.
He didn’t recommend a Mexican cement stock this month, but he did recommend a stock that should benefit from current immigration trends. Of course, I’m very bearish on stocks after July, so the investment Charles dug up is shorter term in nature, and he’ll manage it closely with stop losses.
It lies south of the border, and I’ll let him share the details…
Let’s Revisit the Immigration Story
As Harry pointed out, Mexican immigration is in significant decline due to fewer job opportunities and stricter enforcement in the United States and due to changing demographics in Mexico itself. Mexico’s traditionally high birth rates peaked in the early 1970s and have been in decline ever since.
In 1970, the average Mexican woman had 6.7 children over the course of her life. By 2015, that number had fallen to 2.3 children, only marginally higher than the number for an American woman. So, smaller families from the 1980s on have led to fewer potential immigrants today.
Urbanization and rising living standards help too; a worker earning a comfortable living in Mexico City or Monterrey has little incentive to pack his bags and make the trip north.
New American immigration restrictions only reinforce the existing trend of more Mexican nationals opting to stay at home.
This creates problems for Mexico’s consumer economy, as remittances from family members working in the United States create a steady stream of cash that gets spent in Mexican stores. But it also creates opportunities, as returning Mexican nationals need basic consumer staples.
So, this month, we’re heading south of the border with a new recommendation in a Mexican coke dealer… though not that kind of coke dealer.
Besides being the largest distributor of a well-known brand, it also owns the largest and fastest-growing chain of convenience stores in Latin America.
Booming While the World Snoozed
You probably wouldn’t associate the past 10 years with a boom in much of anything, as pretty much the entire world has been stuck in a slow-growth malaise. Yet from 2005 to 2015, our latest recommendation to enter the Boom & Bust model portfolio managed to grow its revenues at a 15% compound annual growth rate. And perhaps more impressively, it has raised its dividend at a 26% compound annual growth rate. That means that it’s doubled its dividend ever 2.8 years. Not too shabby!
Those numbers are testament to the crisis-proof nature of this company’s businesses (and to clarify, we’re talking businesses here, not stocks).
It managed to grow its revenues at a very healthy clip during one of the most difficult 10-year periods in modern history. It seems that when the economy gets bad, you might wait longer to replace your car or your TV. But you’re not real likely to forgo a quick trip to the convenience store when you need a two-liter bottle of soda or a box of diapers.
I expect Mexican stocks and the peso to have a nice run over the coming months… they’re certainly due for it. If we get a general selloff in the stock market, as Harry expects we will later this year, we’ll get out. But this is a good opportunity for us to scalp some nice profits between now and then as Mexican stocks and, importantly, the Mexican peso enjoy a nice rally.
If you’d like to be in on the action, get your hands on the latest issue of Boom & Bust.
Harry Dent, Senior Editor, Economy & Markets
Charles Sizemore, Boom & Bust Portfolio Manager