Cramer Says Put 20% of Your Equities in Foreign Stocks

Text Size Aug.06
7:45 PM ET Thursday, 6 Aug 2009
A Foreign Stock That Deserves Your Attention
Posted By:Paul Toscano
Topics:Stock Picks Stock Market
Companies:Coca Cola Co Embotelladora Andina S.A.
If you have your fears about the economic fate of the United States, Cramer’s got the right formula to ease your worries and probably make you some Mad Money at the same time. What is it, you ask? Buy foreign stocks with good fundamentals and high dividends.

"20% of your portfolio should be foreign" the Mad Money host said on Thursday, as he looked to Latin America for one company that really fits the bill.

Although he’s already suggested Brazilian Utilities, a Canadian pipeline operator and a Norse oil company, this South American name should definitely be added to your list. It’s Embotelladora Andina [AKO.B 18.0 -0.05 (-0.28%) ], a non-alcoholic beverage play and bottling company which distributes fruit juices, teas, sport drinks and bottled water. It also hails as Coca-Cola’s [KO 49.41 0.07 (+0.14%) ] 7th largest bottler, as well as being the largest bottler in Chile and the second largest in Brazil and Argentina.



In the markets where it operates, Cramer says, Andina has a monopoly-like market share: 67% in its Chilean markets 51% in its Argentina and 57% in its Brazilian markets.

Cramer’s take on Andina is simple: the landscape of the beverage distribution business is generally stable, but with Latin America’s booming population there are huge opportunities for volume growth. But that’s not all! Cramer points out that the business of bottling is extremely profitable in and of itself, which is why Pepsi recently bought back Pepsi bottlers.

But why Latin America? It’s a different investing landscape than in the US, Cramer says, as countries like Chile, Argentina and Brazil are seeing 2-3% growth in annual real GDP, not to mention a low dependents-to-working-age ratio.

But even in this environment, you also have to find good companies, and that’s why Cramer likes Andina.

It also generally pays out all of its free cash flow as dividends, he points out, and right now it’s expected to pay around $1.08 a share, which comes out to a 6% yield.

But, Andina does come with a caveat: The company isn’t very liquid in the US, and trades at low volumes of about 500,000 shares per day in its home market, so Cramer urges caution and suggests buying in small increments, using limit orders so you don’t move the stock.

Cramer’s The bottom line: for a safe Latin American stock with big yield, look no further than the latest member of the Cramerican foreign legion, Embotelladora Andina.


The five other foreign stocks that Cramer recommended last week:

CIG,CPL,TRP,STO & BIN