Tuesday, April 30, 2013

Let’s take a trip across the grand whiskey river to our south with the iShares Latin America 40 Index Fund (ILF).  It is not an elite ranker but does find itself in Quant’s 65th place today, its highest yet.  You may think an investment idea in the land of drug cartels and even worse politics is the last thing you needed first thing this morning but we have been noticing the fund creeping up in our models lately.   While institutional money is reportedly all going to Mexico, ILF pairs Poncho with Lefty and the 7 countries represented within are not all Spanish angels.

Mexico accounts for over 27% of AUM but they speak Portuguese in Brazil which accounts for more than 52%.  The US may not be Latin America but Southern Copper pretty much is and accounts for a little over 1% and Peru has one company accounting for less but Bermuda has 2% that is really Peruvian. Chile and Columbia combine for another 16% so all told, the words fit the picture.  ILF’s better scores recently have been driven by its high 91.1 sentiment score showing the market about as bearish as it can get.  That bearishness is understandable with a look at its poor chart which explains its 48.8 technical score that tastes like yesterday’s wine.  Its 56.2 Fundamental Score isn’t much better saying its valuation is in the middle of its range over more than a decade of trading.  All that combines for a respectable 7.44 Green Diamond Reward Rating while its 5.42 Red Diamond Risk Rating is higher than average for equity ETFs but is driven by high volatility and deviation which may appeal to the real cowboys out there.

So why do you have to choose between BRIC or MIST?  ILF gives you some of each and its 7% correction over the last three months has wound the bearish spring tightly.  Unwinding those positions will help its technicals and could have traders living in the Promiseland but long term fundamental investors may want to find a cleaner shirt.  Bringing ETF ideas to you is always on our mind and we will be back on the road again tomorrow morning with more.  In the meantime we want to wish a happy 80th birthday to the Red Headed Stranger, Willie Nelson.

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