Smooth operator.

Even in the storm there are good investment options

For the last two months we have seen markets around the world going up and down like a roller coasters. Affected by the U.S. cool down, Japan's sick economy and Argentina's prolonged crisis, many major companies, once considered to be as strong as steel, are withering like fallen leaves.

With corporate earnings falling short of expected numbers and the persistent weakness of U.S. dot-coms, it seems as though markets are doing their annual spring cleaning and only the fittest will survive. The balsa has especially resented the U.S. downtrend, considering that the leading Mexican stocks trade a strong percentage of their capital in ADRs (American Depositary Receipts) on the NYSE ( New York Stock Exchange).

So, is there an end in sight to these black days? That is what we will see through the second quarter, when many analysts are predicting that stock values could start gaining again as possible fiscal reforms, Fed rate cuts and continued consumer confidence take effect. Consequently, stock prices could rise to middle levels and remain there until the end of the year, representing, if not an aggressive growth like last year, at least a healthy ground to land on.

DIVERSIFY YOURSELF

Many investors are skeptical of investing at this time, and even the brave are uncertain of where to put their money. First of all, it is not advisable to invest everything in a single instrument, so try to diversify your portfolio. There have been good revenues in the money market, where the 28-day, 91-day and 182-day Federal Treasury Certificates (Cetes) have continued to offer attractive possibilities. Investment funds are also a good option, and generally handle several instruments within their portfolio, including debt securities, equity instruments and commodities. It is important to call your brokerage to find out how aggressive its portfolios are in relation to your risk resistance. Some might just be too aggressive for your health.

One stock that is attractive at the moment is Banamex. It has been trading at a year maximum fluctuation of 19 pesos and a 8.73 peso-low, and is currently trading with a 17.10 peso-high and a 16.90 peso-low. This bank has showed it has what it takes to resist punches and has reported healthy finances during the year. The company was recently named "best domestic bank" by Global Finance magazine, and on April 5, Banamex issued a US$500 million note payable in two years, which is the biggest in Banamex history. This note was granted the "P1" grade by Moody's and "A-1+" by Standard & Poor's, putting the bank into the higher credit levels in the North American market. The operation is backed by 36 banks, including Barclays, Banca Commerciale Italiana, Dresdner Ban Lateinamerika and Bank of America.

The persistent drops in the U.S. market will settle as the economy gradually returns to a bull period. Meanwhile, some Mexican companies are expanding their horizons and investing strong amounts of money in Europe, which will probably yield pleasant surprises in coming months. Case in point: Vitro (Vitro A) is currently investing in Spain, acquiring 60% of Cristaglass Vidrio Aislante, which makes US$60 million in annual sales. We will focus on this company in future articles.

Rafael Olvera is an independent financial consultant

28-day Cete rates over the last year
2000
Jan   16.25%
Mar   13.68%
May   15.10%
Jul   13.77%
Sep   15.56%
Nov   17.57%
2001
Jan   17.87%
Mar   15.80%
Note: Table made from bar graph