The Zacks Analyst Blog Highlights: Desarrolladora Homex, Grupo Aeroportuario
del Pacifico, America Movil, CEMEX and MDC Holdings
CHICAGO, July 5, 2013
CHICAGO, July 5, 2013 /PRNewswire/ --Zacks.com announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog include Desarrolladora Homex, SAB de CV
(NYSE:HXM-Free Report), Grupo Aeroportuario del Pacifico S.A.B. de CV
(NYSE:PAC-Free Report), America Movil S.A.B. de C.V. (NYSE:AMX-Free Report),
CEMEX, S.A.B. de C.V. (NYSE:CX-Free Report) and MDC Holdings Inc.
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO )
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of
the Day pick for free.
Here are highlights from Wednesday's Analyst Blog:
Fed Taper Mayhem: 2 Mexican Stocks to Buy
They say, "When the U.S. sneezes, the rest of the world catches a cold," and
this seems to have proved true for an emerging market like Mexico, the second
largest economy in Latin America. As the Fed kept faltering to taper QE, the
Mexican peso witnessed a roller-coaster ride in both the bond and stock
As things settled down after a week-long frenzy, it is time now to cherry pick
some Mexican stocks. But before we zero-in on which ones to buy, let's have a
recap of the vagaries in the Mexican economy.
The Rise of the Mexican Peso
With its close ties to the U.S., Mexican assets – like the relatively stable
high-yielding government bonds – have been one of the most lucrative
investment propositions for investors to leverage cheap loans in developed
countries. Consequently, there was a significant inflow of funds into the
economy as foreign holdings of peso debt amplified six-fold since 2009 to
$1.75 trillion pesos ($136 billion) in Apr 2013.
Booming investor confidence triggered by a highly liquid market and hands-off
attitude by officials steered the peso to a 4.3% return in 2013 till mid-May –
the best performance among 16 major currencies tracked by Bloomberg. The
economy was further buoyed by a reform push by the newly-formed government and
a record-low benchmark interest rate of 4% by the Bank of Mexico (Banco de
Mexico). Bonds and stocks kept scaling newer highs as Mexico gradually became
the blue-eyed boy among investors.
The Ignominious Fall
On Jun 19, Fed Chairman Ben Bernanke announced his intentions to start
tapering and gradually phase out its $85 billion monthly bond-buying program
by 2014. Although the announcement indicated an overall improvement in the
U.S. financial system and dialed down the need for any additional stimulus, it
ruffled the dynamics of several economies, including Mexico.
This led to a near stampede as foreign investors rushed for the exit door and
some of the worst sell-offs of Mexican bonds since 2010. With speculations
being rife about Fed tapering since early May, the Mexican peso plummeted from
below 12 per dollar to over 13, while the benchmark ten-year bonds rose from a
historic low of 4.4% to 6.2%. Even Mexican Bolsa IPC Index, the Mexican Stock
Exchange, had an uncharacteristically sharp fall to close at a 52-week low.
A drastic fall in the currency and heavy outflow of capital have catapulted
expectations of a further lowering of interest rates for a second time this
year. At the same time, experts believe that in order to prevent further fall,
the government can bring in some radical reforms by opening up the energy
sector, which is considered to be one of the vital pillars for augmenting the
long-term growth potential of the country.
On the other hand, some industry observers opine that subsequent Fed tapering
could be a "winner's curse" for Mexico as they largely depend on the U.S.
economy, which account for almost 80% of its total exports. So an overall
improvement in the underlying growth factors for its northern neighbor would
indeed work in favor of long-term gains. Thus, would it be fair to wish to
delay the inevitable for short-term profit?
As markets have more or less stabilized, with reports of weaker U.S. GDP
growth forcing the Fed to reconsider its decision and continue with the
bond-buying program, it is deja vu for investors all over again. In this
context, top Mexican stocks with attractive valuation metrics backed by a
solid Zacks Rank methodology include home developer Desarrolladora Homex, SAB
de CV (NYSE:HXM-Free Report) and airport manager Grupo Aeroportuario del
Pacifico S.A.B. de CV (NYSE:PAC-Free Report).
Both of these stocks hold a Zacks Rank #2 (Buy). While Desarrolladora Homex
has a forward P/E and long-term earnings expectation of 1.52 and 13.15%,
respectively; Grupo Aeroportuario has respective tallies of 19.67 and 9.37%.
We also suggest a couple of Zacks Rank #3 (Hold) stocks – America Movil S.A.B.
de C.V. (NYSE:AMX-Free Report) and CEMEX, S.A.B. de C.V. (NYSE:CX-Free Report)
– as they are expected to post robust earnings growth of 8.34% and 18.98%,
Even some hedge funds are bullish on the Mexican peso and anticipate the
recently-found optimism to continue through year's end. As fundamentals look
strong, the market is getting flocked by a huge pool of investors, creating
short-term noises and long-term opportunities. Only time will tell whether
such investor confidence is justifiable or not.
MDC Holdings Upped to Strong Buy
On Jul 2, Zacks Investment Research upgraded MDC Holdings Inc. (NYSE:MDC-Free
Report) to a Zacks Rank #1 (Strong Buy) on the back of growing momentum in the
homebuilding market and a bright industry outlook for the year.
Why the Upgrade?
MDC Holdings is benefiting from the increase in demand for new homes, a fact
supported by most of the housing data released recently.
The housing market has seen significant upside in new home construction
activity, which is fueled by the increase in demand for new homes. Despite
recent increase in mortgage rates, the housing market continues to witness
momentum, indicating stable recovery. Increased affordability due to higher
rentals is boosting demand. Supply, however, remains limited due to low
inventories, both for new and existing homes. Home prices have thus moved up
sharply with increased market demand and limited supply.
Most homebuilders like MDC Holdings are thus, witnessing increasing traffic
levels due to heightened consumer demand. Majority of the companies are
witnessing significant growth in both volumes and average selling prices. MDC
Holdings has recorded high double digit earnings surprises for the past seven
quarters. Its average surprise for the past four quarters is 74.42%.
The strong housing momentum has also been reflected in MDC Holdings' solid
first quarter results (ended Mar 31) reported on May 2, 2013. Its first
quarter fiscal 2013 adjusted earnings per share and total revenue beat the
Zacks Consensus Estimate and the prior-year quarter levels by a wide margin.
The beat was driven by high double digit year-over-year growth in new home
orders, backlogs, home closings and margin expansion. The company was also
able to increase average selling price of the homes sold by 9%.
MDC Holdings is due to report its fiscal second quarter 2013 results in late
Jul/early Aug. The Zacks Consensus Estimate at the moment is pegged at 55
cents per share.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of
the Day pick for free.
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