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Latin vibes

I was recently asked to recommend a speculative fund where the returns are likely to be outstanding. I think the answer is to choose one of the Latin American funds, particularly one which invests in the stockmarkets of Mexico and Brazil.

The bigger, highly profitable companies in both these countries have virtual monopolies or duopolies. For example, in Brazil, CVRD has now overtaken Rio Tinto and BHP Billiton to become the worlds biggest supplier of iron ore. It has been able to put up prices substantially every year and expects to be able to do so again in 2007 because there is still a worldwide shortage of iron ore.

In Mexico, America Movil has 70 per cent of the mobile phone market and dominates the rest of the market in Latin America.
The two funds I like best and there is little to choose between them are Invesco Perpetual Latin American and Threadneedle Latin American.

The former is managed by Dean Newman and has gone up by 166 per cent over the last three years to November 1, 2006. His biggest holdings are Petroleo Brasileiro, Vale Do Rio Doce, America Movil, Banco Bradesco, Cemex and Telmex.

The Threadneedle Latin American fund, managed by Jules Mort, also has big holdings in all these as well as Tenaris and Wal-Mart do Mexico. This fund has increased by around 154 per cent over the past three years but is slightly ahead of the Invesco Perpetual fund over one and two years.

These funds are very speculative as both these markets have from time to time had one-week losses of over 20 per cent. On the other hand, they should continue to show excellent returns over a period but beware of a rocky ride. Only investors prepared to take high risks should invest.

Sideways Glance by Julian Gibbs

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