Cabot’s “One Great Undiscovered Bank Stock”

Despite the fact that the “developing” world continues to grow much more quickly than the huge established economies of Europe, Japan and North America, investors are still largely reluctant to invest in emerging markets these days.

That’s understandable, for sure — when the media is telling you to be worried, and when the US dollar is surging and there seems to be regulatory risk, panics caused by falling commodity prices, and even genuine war and revolution brewing around the world, to say nothing of genuinely failed states like Venezuela, there’s a reasonable desire to be safe and keep your money at home. And since the US has led the world in terms of both currency performance and stock market performance for a while now, you also get rewarded for being a little bit afraid.

But still, eventually we have to expect that the emerging markets will bring some growth to the table to mitigate the risk they always have, and that exposure to those markets will be good for us in the long term.

There are precious few newsletters who focus on emerging markets anymore (there used to be dozens, with at least five or six big ones specifically focused on China), so I usually take notice when one of the “last men standing” in that sector teases a stock. That’s why I was intrigued by the latest hints dropped by Timothy Lutts over at Cabot about the new emerging markets pick found by Paul Goodwin.

Goodwin is the analyst for Cabot Emerging Markets Report, which I called the last “China” newsletter standing last year when it was still named Cabot China & Emerging Markets Report. The last China pick from Goodwin that I wrote about was NetEase (NTES), which has worked out pretty well over the past year… but this one, though still an “emerging market” pick, is far different…. and Lutts calls it “far less risky” than the other emerging market ideas in Mexico, Taiwan and elsewhere that Goodwin has been picking of late.

So what is this “less risky” emerging market idea? They call it a “Great Undiscovered Bank Stock,” and these are the clues we get from Lutts:

“… it’s a bank in a country… that’s usually overlooked by most investors.

“Hint: it’s from a country that borders Brazil.

“And business is great!

“Earnings at the bank are expected grow 7% this year and 15% next year.

“The stock’s P/E ratio is just 12.

“And it pays a 1.7% dividend.

“Altogether, I think it’s a great opportunity to benefit from Brazil’s troubles. As money flows out of Brazil, some of it is making its way to this country….

“Now, I could tell you the name of the stock, and you could run out and buy it now. But then you’d be on your own, and I think you deserve more. I think you deserve regular advice on investing in emerging markets from the man who originally discovered this stock, our own Paul Goodwin.”

Well, maybe you deserve more — but you probably won’t get it from me. I can just tell you what stock he’s teasing, and get you started on making a decision for yourself. The Thinkolator sez this is Credicorp (BAP)

Credicorp is technically a Bermuda-headquartered company, but that’s presumably just a tax dodge — it’s really a Peruvian financial services company (I’m sure they’d want me to say, the largest Peruvian financial services company). Their investor relations page is here, including links to presentations and explanations of the business. They do have a controlling family shareholder (the Romeros, a billionaire family with stakes in many Peruvian operations), and the stock has been a very strong long term performer (though also fell by 50% last year before recovering, and has had several 20% drops since the 2008 crisis… it’s risk averse compared to Chinese tech stocks, I suppose, but not necessarily stable).

And yes, per Yahoo Finance’s estimates the trailing PE is just 12, and it does pay a dividend near 1.7%. The current analyst average estimate (also from Yahoo Finance) is that they will have flat earnings in 2016, though the prediction of 15% growth next year does sti