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Invest in Mexican real estate, short US pizza: Analyst

Choose Mexican over pizza, one analyst told CNBC's Street Signs, and he wasn't strictly talking about takeaways.

"The market is discounting a lot of macro bad news," Alexis Dawance, head of equities at MFM Mirante, said, by way of rationalizing his stock picks.

For Dawance, Donald Trump's election to U.S. president means that investment in Mexican real estate could be beneficial as "it has never been so cheap to manufacture in Mexico due to the peso."

While President-Elect Trump threatened during his campaigning to pull the U.S. out of the North Atlantic Free Trade Agreement (NAFTA) and introduce protectionist policies, Dawance suggested that there was a "risk he might not be as aggressive as he says."

The wider "strategy here is to go into defensive businesses (in a) risk country," Dawance explained. "Risk reward is very interesting in the real estate in Mexico," he added.

Dawance cited Mexican construction company PINFRA as an example of favorable stock, which is currently building toll roads in Mexico and more importantly, "trading at a 50 percent discount towards U.S. peers" and offering a dividend yield of eight percent.


The Mexican construction space is "exactly the mirror position … of infrastructure in the U.S.," Dawance argued, citing comparison with the U.S. steel, engineering and construction industries, where "stock prices went through the roof, when nothing has been done so far." He also mentioned wage pressure on U.S. industries.

Dawance also mentioned Fibra Inn, a Mexican real estate trust which acquires and leases hotel properties. The company has been "almost divided in two in U.S. dollar terms during the last year and a half," he said. But, he added that businesses of this ilk are "facing a lot of consolidation, and that's benefiting from the lower peso with a lot of tourists coming in."

Shifting gears, "pizza (stock) is way too expensive," Dawance asserted. "Domino's Pizza is running at 41 times PE," he said, by way of an example.

He blamed ingredient prices, saying that there was "a lot of pressure probably coming from cheese, from commodity pressure coming up (and) from wages." Also, Dawance referenced "higher insurance costs," saying that accidents had happened more frequently with delivery trucks.

Dawance disagreed with other analysts who labelled Domino's a technology company, saying that its online service was "very basic," meaning that pop-up shops could also implement similar systems to "narrow the gap."

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