What Chile calls recession-level growth, the U.S. calls economic expansion. Even when that Latin American country slows to half speed, the numbers still leave American businesses drooling. Chile’s outperformance drives home a point that Cramer repeatedly makes on Mad Money: Investors should always have a portion of their portfolios in international stocks.
If you’re looking for some overseas exposure, Cramer’s urging you to consider Chile. This country’s gone pro-business and pro-investor, so erase any images you have of Salvador Allende era 1970s Chile. Sure, GDP growth estimates are down to 3.5% for 2008 from an historical yearly average of 6%, but thanks to a smart government decision the country’s doing OK. Chile set aside the surplus it earned as the world’s largest supplier of copper specifically for times like these.
Cramer recommended two stocks Thursday that make their home here: Banco Santander Chile and Enersis. (Read about Enersis here.) SAN, whose parent company is Banco Santander Central Hispano, is arguably the biggest and best bank in the country, and fund managers here in the States use it as a proxy investment when they want some exposure to Chile.
While SAN achieves asset growth of 23% and 24% return on equity, and even parent STD’s stock is up 20% since Cramer last recommended it, American names Washington Mutual, Citigroup and Wachovia are down 70%, 49% and 44%, respectively.
Cramer wouldn’t normally recommend a subsidiary, but SAN is one of Chile’s top five banks in a market with extremely high barriers to entry. Those five control 80% of the loan market. With interest-rate cuts expected for the second half of the year, business for SAN should be very good.
Banco Santander Chile also has a nice 4.5% dividend yield, a cheap valuation and even growth. Not bad for a financial, eh? There are plenty of reasons to consider buying SAN.
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