Money Map: “Blue-Hot Chips Taking the World by Storm”

By Travis Johnson, Stock Gumshoe, March 1, 2008

Several of you have undoubtedly seen this email come across your screens in the last week or two, it’s been in pretty heavy rotation as far as I can see.

And it’s an ad for just the kind of investments many folks are looking for these days: foreign “blue chip” stocks. The newsletter being teased here is the Money Map VIP Trader, which apparently is worth $3,400 a year but is currently “on sale” for $995.

They’re promising that their next seven picks will be winners or they’ll pay you … I’d read the small print on that one if you’re actually interested in it, but perhaps they’re being genuine. What sounds interesting here are the teaser companies, and there are two:

A dominant and growing force in regional aircraft.

and

A high-tech Cement titan.

It turns out that these are both companies based in Latin America, though I don’t think he says as much in the ad. What he does say is that “The two recommendations in our free white paper report are set for gains totaling 782%. And you can get them in less than an hour.”

Or, unless you’re a reallllly slow reader, you can just continue on down the road here with your friendly neighborhood Gumshoe … I may be wordy, but I won’t make you wait an hour. Or charge you a thousand clams.

Horacio Marquez, the editor of the newsletter, gives us several clues — and I have to offer him a fond word, too, because unless I’m missing something this is the first big ‘ol email teaser I’ve seen that actually has endnotes. He cites the sources for all the facts he claims, including the market caps of these companies, the newspaper articles about trends in their sectors, etc. Nice work, Horacio, even if you did apparently refer to Foreign Policy magazine as the “top-secret Global Economics Paper. I hope you got extra credit from the professor.

The clues?

About the regional aircraft company:

“Right now, one out of every two regional jet aircraft sold in the world come from this astounding company.”

“Our method has just identified this Blue Hot as the only company outside of China that’s contracted to deliver regional jets to this white-hot market… “

(Presumably, “our method” involves more than reading the newspaper … though I wouldn’t be so sure.)

“This Blue Hot has just contracted with a major Chinese company to produce regional jets for the Chinese market at a joint plant in Harbin. Now here’s the thing. China will need an estimated 2,130 regional and executive jets in the coming years.”

OK, so there are many more quotes and footnotes should anyone wish to wade through them … but the Thinkolator has been in idle, tapping it’s foot, for ten minutes now. This regional jet superstar is clearly …

Empresa Brasileira de Aeronutica S.A, more commonly known as Embraer (ERJ)

This is indeed a small company in relation to the behemoths like Airbus or Boeing, and even significantly smaller than competitor Bombardier, but it’s probably the fourth largest private plane manufacturer unless there are still some biggies in Russia. It’s valued at just about $8 billion.

I also like this company and have looked into it before, but always found it just a hair too expensive for my tastes — and it still is, arguably. I expect they will continue to do well, and I agree that they’re in the sweet spot as they build the small 80-120 seat planes that the airlines seem to want, especially the new airlines of Asia and the developing world who are trying to increase service to dramatically underserved areas.

The positives are that they are a strong competitor in this market, they’re moving up into slightly bigger planes (100-130 seats), and they have worldwide exposure and do indeed have some planes going to China.

The negatives are that they’re fairly expensive on valuation, depending on how you peg their growth — the trailing PE is around 20. I don’t know much about the company operationally, but the other potential negative on the macro scale is currency — the Brazilian Real has been on a tear, so Brazilian exporters of large capital goods must be facing some significant margin compression when they sell in dollars. Still, Brazil is quite low-cost so I imagine they’re still doing fine — their profit margin is comparable to Boeing’s, at least upon a quick glance.

And our clues for the second company, the cement titan?

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They call this one “A Company That Just Beat Amazon, eBay, Microsoft and Cisco at Their Own Game…”

Which is pretty clever, if a little silly.

More specifically …

“The Blue-Hot Chip we identified is about to become the world’s largest cement supplier, with operations in 50 different countries. It’s set for a 513% pop. ”

The tech comparison is because of the fact that they bring a new level of technology use and efficiency to the formerly staid cement business …

“It’s the only cement company that owns a satellite telecommunications system. The only one that equipped every one of its trucks in 50 countries with a GPS system. So what’s the big deal? Consider this: This company can deliver ready-mix concrete within 30 minutes after an order is received.”

And yes, there is the obligatory reference to Domino’s pizza — these guys can get you a truck of cement before Howie can get his 1987 Subaru Impreza to your door with your large pepperoni.

There are other clues, too, but, frankly, that’s enough and I’m running short of time. This one is …

Cemex (CX)

Cemex is one of the few dominant cement companies in the world, and a company that I owned shares in until