Let’s begin with Consumer Staples.Companhia de Bebidas das Americas (ABV) is translated to "the American Beverage Company," and commonly known simply as AmBev. This company dominates the Brazilian beer market with brands such as Antarctica, Brahma and Skol. Additionally, the company sells Pepsi brands, Lipton iced tea and other beverages that include mineral water and sports drinks. Along with Brazil, AmBev sells its products in some 13 other countries, including the South and Central American countries of Argentina, Peru, Ecuador, Uruguay and Venezuela.
This company is a great buy for two reasons: First of all, beer and soft drinks are consumer staples that have seen strong sales even during tough times. And secondly, AmBev is benefiting from the fact that the Brazilian real has appreciated dramatically against the U.S. dollar since March. The fact that Brazil's currency has surged over 20% compared to the greenback means that this company's sales and profits have been boosted significantly simply due to favorable exchange rates.
The numbers speak for themselves. In its latest quarter, ABV posted 4% sales growth and 35% earnings growth compared to the same quarter a year ago. This represented a 33% earnings surprise and prompted the analyst community to revise their consensus earnings estimate 22% higher over the past three months. This bodes quite well for AmBev's next quarterly earnings announcement, and this stock is a great buy in anticipation of third-quarter earnings season.
Stock #2: Energy Stock: Southwestern Energy
After bottoming out at the end of 2008, oil prices have started to bounce back. That’s because crude oil, like most commodities, is traded in U.S. dollars. That means if the dollar is strong, then oil is cheap, and when the dollar is weak, then oil is expensive. The bailouts, stimulus packages and earmarks of the last few months have created trillion-dollar deficits for the U.S. as far as the eye can see. As the dollar has declined, energy prices have been creeping back week after week.
This adds up to windfall profits for top energy stock, Southwestern Energy (SWN).
SWN is a pioneer in horizontal drilling—meaning instead of erecting many rigs that drill down into a gas field, it simply taps a well once and then drills sideways to access the remainder of the field. This technology keeps costs down while boosting output. Even if gas prices stay very soft, this horizontal drilling tactic will allow Southwestern to increase sales simply by bringing even more natural gas to the market. This is why the company has been able to beat earnings estimates by about 10% in the last year and see its stock price move up quite nicely.
SWN is just the beginning—my current Buy List has a total of four superior energy stocks that are booming right now.
Stock #3: Electric Utilities: Enersis
Enersis (ENI) is the largest utility in Latin America. Based in Chile, the company distributes power to almost 12 million customers (approximately 45 million people) in regions of Chile, Argentina, Brazil, Colombia and Peru. Enersis also owns a 60% of Empresa Nacional de Electricidad (known as Endesa Chile), which is Chile’s largest power generator, with 13,700 megawatts of generating capacity. The company’s other operations include real estate, electrical engineering, energy trading and support services.
This emerging market is seeing booming demand for energy right now—and that is working in ENI's favor.
ENI posted a 50% increase in earnings in the first quarter, proving that even in a recession this stock is booming due to strong energy demand in the region. This jump is only the beginning, since like China, Latin America's economy has been much stronger than developed nations. Consider that while U.S. GDP declined nearly 6% in the second quarter, Brazil's economy grew 2%! Just imagine how much electricity demand will spike once the worldwide recovery takes hold. It’s obvious the experts think this company has a lot more room to grow.
Stock #4: Chemicals: Sociedad Quimica y Minera
Sociedad Quimica y Minera (SQM) is one of my favorite stocks right now and has joined the Buy List because it is perfect for just about any portfolio. A Chile-based producer of specialty fertilizers, iodine and lithium, SQM has tremendous growth potential and is in great shape to profit from the current market conditions. Specialty fertilizers account for more than half of this company’s sales, but that’s not the only source of profits.
SQM is also one of the world’s largest producers of iodine, which is used in medical, agricultural and industrial applications. SQM has customers in more than 100 countries and generates most of its sales outside Chile and is the world leader in lithium—the material that is used in batteries for hybrid cars. Lithium batteries charge much faster than alternative power cells, and that makes this material crucial to any low-emission vehicle.
Fuel efficiency is now one of the most important aspects of any vehicle, and demand for fast-charging lithium batteries will soar in the automotive market over the next 12 months. Chevy's Volt will debut late next year with lithium cells under the hood, and Toyota is racing to bring a lithium-powered electric car to the market soon after
Stock #5: Metals & Mining: GoldCorp
GoldCorp (GG) is one of the largest precious-metal mining companies in the world, operating mainly in Canada and South America. The company produces more than 2.3 million ounces of gold annually and has about 45 million ounces in proved and probable reserves. But don't be fooled by the name—GoldCorp also owns 1.2 billion ounces of proved and probable silver reserves and 1.4 billion pounds of copper reserves. Silver and copper prices have been on a tear lately, and the diverse mining operations of GoldCorp makes it a great investment right now.
That's because inflation has been driving up commodity prices and gold has been surging in 2009 as a result, topping $1,000 an ounce recently. Other precious metals have also soared in value this year. But recent leaps in this precious metal are only the beginning: Gold prices typically rise in September, as the start of holiday season in the world's biggest gold consuming countries tends to drive up demand. In fact, gold has posted monthly gains for the past 16 out of 20 Septembers, which is better than any other month of the year. That means now is the time to strike if we're looking to buy a precious metals stock.
In the second quarter, GoldCorp's production rose 5% to 582,400 ounces compared to the same quarter a year ago. It cost GoldCorp $310 per ounce to mine gold during the second quarter, which is the lowest of all its major competitors, so as gold prices continue to rise, the company's operating margins and cash flow should increase accordingly. Since GoldCorp is the low cost producer, it stands to profit the most from the rise in gold prices over the long term.
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