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The hazy, hot and humid weather went away. Just in time for my Triple H pick:
Full disclosure, I bought this stock as a $$$MR. MARKET$$$ pick in 2005. I liked it then, and I like it now so a lot of what I am writing about, I wrote about 5 years ago. In other words, it’s a re-run, with important facts updated to 2010.
“Chi-Chi..get the yayo”. So goes one of the most quotable movies of the 1980’s Al Pacino in Scarface. I never saw the movie from the beginning to end, but I always remember “Chi-Chi..get the yayo”.
Because of that line, everyone thinks that the only thing Colombia is good for is producing cocaine. This is simply untrue.
Colombia serves a much more important purpose on this planet.
That’s right. Whenever I see Juan Valdez and that donkey I think of that morning coffee immediately followed by a 45 minute visit to the 3rd stall in my “second office” at work. This is where $$$MR. MARKET$$$ does his best thinking. Consider the possibilities. The person who thinks that Pluto is no longer a planet probably created that thought while resting comfortably following that great tasting cup of Colombian.
Yes, Colombia is hot. Not because its coffee is hot or because its temperature is hot. Its whole economy is hot. Colombia's average annual economic growth rate of over 5% from 2002 to 2007 can be attributed to an increase in domestic security, resulting in greater foreign investment; prudent monetary policy; and export growth. The Andean Trade Preference Act, which was extended through December 2009, also plays a pivotal role in Colombia's economic growth. The signing of a trade promotion agreement with the U.S. in November 2006 provides further opportunity for growth if approved by the U.S. Congress and implemented.
The government's economic policy and democratic security strategy have engendered a growing sense of confidence in the economy, particularly within the business sector. Coffee prices are rising sharply, largely due to poor crops in Vietnam and central America causing a fall in global supplies. The International Coffee Organisation (ICO) said world exports between October and April dropped by 8.1% compared with the same period a year earlier – down from 58m bags to 53.3m. What’s the first industry that benefits from a healthy growing economy? It’s not coffee, it’s banking.
Today I bought Bancolombia (CIB) at 61.98. I will sell it in 4 to 6 weeks at 71.65. Here is why I like CIB:
CIB’s stock is up over 90% in the last 12 months, yet its PE is still only around 6 (almost half of the industry average). What this means is you have a value stock which is growing like crazy. Check out the chart:
There are probably lots of things that you do not know about Colombia.
Location: Northern South America, bordering the Caribbean Sea, between Panama and Venezuela, and bordering the North Pacific Ocean, between Ecuador and Panama
Area - comparative: slightly less than three times the size of Montana
Natural resources: petroleum, natural gas, coal, iron ore, nickel, gold, copper, emeralds, hydropower
Population: 45,012,096 - 2008
Languages: Spanish
Literacy: definition: age 15 and over can read and write
total population: 90.4%
Independence: 20 July 1810 (from Spain)
Legal system: based on Spanish law; a new criminal code modeled after
US procedures was enacted into law in 2004; judicial review of executive and legislative acts; accepts compulsory ICJ jurisdiction, with reservations
Oil - production: Colombia's crude oil output should reach at least 1.2 million barrels a day by the end of 2012, nearly double the average daily production reached last year.
Financial services are a large and important component of the Colombian service sector, included private financial institutions that facilitated business and individual loans, as well as public institutions that directed funds to socially desirable activities that might not meet the credit requirements of private banks.
The economic downturn of the early 1980s threatened the profitability of banking. Colombian financial institutions came under increasing pressure as the 1981 recession induced retrenchment of the manufacturing sector. This, in turn, caused a sharp rise in loan defaults. Real interest rates at the time averaged 10 to 12 percent, which exacerbated the payment problems of indebted companies. The number of loans considered unlikely to be collected as a percentage of the lending portfolio increased from 5.6 percent in 1982 to 11.3 percent in 1984. Foreign interests in Colombian banks also began to withdraw capital rather than deposit it, which further drained reserves necessary to meet regulatory requirements. Subsequent bank failures and nationalizations resulted in a decline in public confidence and led to massive government intervention.
Notwithstanding increased government supervision, a large infusion of public capital, and improved economic conditions, the remaining private financial institutions continued to flounder in the late 1980s. Because of high inflation and unstable real interest rates, most depositors placed their money in readily accessible accounts such as checking accounts or short-term certificates of deposit. This constrained lending strategies, because larger portions of loan portfolios now had to be constructed with short-term arrangements in mind. Much of the long term credit for mortgages and business investment had to be secured through the central bank or any one of the many government-operated development funds.
The shadow of this instability has kept companies such as Bancolombia in the dark when it comes to identifying hot and sexy growth companies. However, the fact of the matter is that today’s Colombia is very different from your daddy’s Colombia. No longer do they shoot soccer players for giving up goals. On the contrary, happy days are here again and the major money center banks are thriving as a result. Colombia's stock market is already up 9% this year. A free trade pact with the U.S. is moving fast, undaunted by the recent battle over CAFTA. Violent crime is at a 20 year low. This is a good recipe for stability.
Strong overall results for the banks can be attributed to higher profit margins, increased levels of bank capitalization, better returns on portfolio investments and a recovery in demand for credit.
Colombia's financial system has been turning in steeply higher profits in recent years. Banks have cleaned up bad debts and rebuilt loan portfolios after a recession in 1999 that forced bank closures and required a $4.5 billion government bailout program. Supervision has since been tight, and Colombia's banks have been relatively healthy since 2001.
For the quarter ended March 31, 2010 ("1Q10"), Bancolombia's consolidated net income totaled COP 341 billion (COP 433 per share - USD 0.90 per ADR), which represents an increase of 10% as compared to the results for the quarter ended March 31, 2009 ("1Q09"), and a decrease of 8% as compared to the results for the quarter ended December 31, 2009 ("4Q09"). Bancolombia's return on average shareholders' equity ("ROE") for 1Q10 was 19.4%. Bancolombia provides commercial and consumer banking from more than 350 branches in about 120 municipalities throughout the country. Bancolombia offers a variety of loan types, trade financing, and foreign currency exchange to its commercial customers.
As of December 31, 2009, its branch network consisted of 900 offices. The company also operates 2,669 ATMs, including 2,271 machines in Colombia and 398 ATMs in El Salvador; and a network of 8,049 PACs. Bancolombia S.A. was founded in 1945 and is headquartered in Medellin, the Republic of Colombia.
Already, BanColombia has been boosting its lending to consumers and small and midsize companies. With a 19% return on equity (versus 10% industry average), the bank has been enormously profitable.
Bancolombia is heavily reliant on the macroeconomic performance of its home country. Almost all its loans are made to Colombian debtors and the majority of its investments are engaged in Colombian government bonds. This has benefited the bank over the past several years. Therefore, the stable and improving economy has boosted revenue and earnings at Bancolombia. Consumers are once again also increasing demand for borrowing and credit-card debt.
Well, you have 5 year revenue growth of over 30%. You have 12 month EPS growth of 27%...things seem to be moving along very nicely thank you very much.
Looking ahead, the bank seeks to expand its loan portfolio by extending larger lines of credit to an increasing number of retail and small-business clients, especially through credit cards. Such loans and credits carry higher interest rates and fee income than corporate loans.
Bancolombia is a bank with an important presence in the international capital markets and a leading participation in the Colombian market. It is one of very few Colombian companies listed on the NYSE. 97% of the Top 100 Colombian companies have banking relationships with CIB. Even with its overall growth, its asset quality is getting better, not worse. Colombia's banks are in relatively good shape. They played their hand more cautiously than U.S. banks, thus avoiding risky loans. Bancolombia raised its dividend in March.
Bancolombia is expecting the industry's loan portfolio to grow between 5% and 8% this year, which means it is most likely that CIB will outperform the market averages.
"The Colombian economy is growing," Bancolombia Chief Executive Jorge Londono Saldarriaga said at the earnings call Tuesday. "It's certainly growing faster than most of the people were expecting it to grow at the end of last year."
Betting on a global economic recovery? Then you better bet on Colombia. If you’re going to bet on Colombia, there’s no need to look elsewhere than CIB.
I am HUGE!!
$$$MR. MARKET$$$
Visit http://www.mrmarketishuge.com and let everyone know what you think of this stock pick.
Full disclosure, I bought this stock as a $$$MR. MARKET$$$ pick in 2005. I liked it then, and I like it now so a lot of what I am writing about, I wrote about 5 years ago. In other words, it’s a re-run, with important facts updated to 2010.
“Chi-Chi..get the yayo”. So goes one of the most quotable movies of the 1980’s Al Pacino in Scarface. I never saw the movie from the beginning to end, but I always remember “Chi-Chi..get the yayo”.
Because of that line, everyone thinks that the only thing Colombia is good for is producing cocaine. This is simply untrue.
Colombia serves a much more important purpose on this planet.
That’s right. Whenever I see Juan Valdez and that donkey I think of that morning coffee immediately followed by a 45 minute visit to the 3rd stall in my “second office” at work. This is where $$$MR. MARKET$$$ does his best thinking. Consider the possibilities. The person who thinks that Pluto is no longer a planet probably created that thought while resting comfortably following that great tasting cup of Colombian.
Yes, Colombia is hot. Not because its coffee is hot or because its temperature is hot. Its whole economy is hot. Colombia's average annual economic growth rate of over 5% from 2002 to 2007 can be attributed to an increase in domestic security, resulting in greater foreign investment; prudent monetary policy; and export growth. The Andean Trade Preference Act, which was extended through December 2009, also plays a pivotal role in Colombia's economic growth. The signing of a trade promotion agreement with the U.S. in November 2006 provides further opportunity for growth if approved by the U.S. Congress and implemented.
The government's economic policy and democratic security strategy have engendered a growing sense of confidence in the economy, particularly within the business sector. Coffee prices are rising sharply, largely due to poor crops in Vietnam and central America causing a fall in global supplies. The International Coffee Organisation (ICO) said world exports between October and April dropped by 8.1% compared with the same period a year earlier – down from 58m bags to 53.3m. What’s the first industry that benefits from a healthy growing economy? It’s not coffee, it’s banking.
Today I bought Bancolombia (CIB) at 61.98. I will sell it in 4 to 6 weeks at 71.65. Here is why I like CIB:
CIB’s stock is up over 90% in the last 12 months, yet its PE is still only around 6 (almost half of the industry average). What this means is you have a value stock which is growing like crazy. Check out the chart:
There are probably lots of things that you do not know about Colombia.
Location: Northern South America, bordering the Caribbean Sea, between Panama and Venezuela, and bordering the North Pacific Ocean, between Ecuador and Panama
Area - comparative: slightly less than three times the size of Montana
Natural resources: petroleum, natural gas, coal, iron ore, nickel, gold, copper, emeralds, hydropower
Population: 45,012,096 - 2008
Languages: Spanish
Literacy: definition: age 15 and over can read and write
total population: 90.4%
Independence: 20 July 1810 (from Spain)
Legal system: based on Spanish law; a new criminal code modeled after
US procedures was enacted into law in 2004; judicial review of executive and legislative acts; accepts compulsory ICJ jurisdiction, with reservations
Oil - production: Colombia's crude oil output should reach at least 1.2 million barrels a day by the end of 2012, nearly double the average daily production reached last year.
Financial services are a large and important component of the Colombian service sector, included private financial institutions that facilitated business and individual loans, as well as public institutions that directed funds to socially desirable activities that might not meet the credit requirements of private banks.
The economic downturn of the early 1980s threatened the profitability of banking. Colombian financial institutions came under increasing pressure as the 1981 recession induced retrenchment of the manufacturing sector. This, in turn, caused a sharp rise in loan defaults. Real interest rates at the time averaged 10 to 12 percent, which exacerbated the payment problems of indebted companies. The number of loans considered unlikely to be collected as a percentage of the lending portfolio increased from 5.6 percent in 1982 to 11.3 percent in 1984. Foreign interests in Colombian banks also began to withdraw capital rather than deposit it, which further drained reserves necessary to meet regulatory requirements. Subsequent bank failures and nationalizations resulted in a decline in public confidence and led to massive government intervention.
Notwithstanding increased government supervision, a large infusion of public capital, and improved economic conditions, the remaining private financial institutions continued to flounder in the late 1980s. Because of high inflation and unstable real interest rates, most depositors placed their money in readily accessible accounts such as checking accounts or short-term certificates of deposit. This constrained lending strategies, because larger portions of loan portfolios now had to be constructed with short-term arrangements in mind. Much of the long term credit for mortgages and business investment had to be secured through the central bank or any one of the many government-operated development funds.
The shadow of this instability has kept companies such as Bancolombia in the dark when it comes to identifying hot and sexy growth companies. However, the fact of the matter is that today’s Colombia is very different from your daddy’s Colombia. No longer do they shoot soccer players for giving up goals. On the contrary, happy days are here again and the major money center banks are thriving as a result. Colombia's stock market is already up 9% this year. A free trade pact with the U.S. is moving fast, undaunted by the recent battle over CAFTA. Violent crime is at a 20 year low. This is a good recipe for stability.
Strong overall results for the banks can be attributed to higher profit margins, increased levels of bank capitalization, better returns on portfolio investments and a recovery in demand for credit.
Colombia's financial system has been turning in steeply higher profits in recent years. Banks have cleaned up bad debts and rebuilt loan portfolios after a recession in 1999 that forced bank closures and required a $4.5 billion government bailout program. Supervision has since been tight, and Colombia's banks have been relatively healthy since 2001.
For the quarter ended March 31, 2010 ("1Q10"), Bancolombia's consolidated net income totaled COP 341 billion (COP 433 per share - USD 0.90 per ADR), which represents an increase of 10% as compared to the results for the quarter ended March 31, 2009 ("1Q09"), and a decrease of 8% as compared to the results for the quarter ended December 31, 2009 ("4Q09"). Bancolombia's return on average shareholders' equity ("ROE") for 1Q10 was 19.4%. Bancolombia provides commercial and consumer banking from more than 350 branches in about 120 municipalities throughout the country. Bancolombia offers a variety of loan types, trade financing, and foreign currency exchange to its commercial customers.
As of December 31, 2009, its branch network consisted of 900 offices. The company also operates 2,669 ATMs, including 2,271 machines in Colombia and 398 ATMs in El Salvador; and a network of 8,049 PACs. Bancolombia S.A. was founded in 1945 and is headquartered in Medellin, the Republic of Colombia.
Already, BanColombia has been boosting its lending to consumers and small and midsize companies. With a 19% return on equity (versus 10% industry average), the bank has been enormously profitable.
Bancolombia is heavily reliant on the macroeconomic performance of its home country. Almost all its loans are made to Colombian debtors and the majority of its investments are engaged in Colombian government bonds. This has benefited the bank over the past several years. Therefore, the stable and improving economy has boosted revenue and earnings at Bancolombia. Consumers are once again also increasing demand for borrowing and credit-card debt.
- Solid non-interest income throughout the quarter. The combined revenue of net fees and other operating income totaled COP 564 billion, which represents an increase of 14% as compared to 1Q09. This performance is explained by solid results from our investment banking unit, higher income from derivatives and solid fee generation across our businesses.
- Strong balance sheet: reserves for loan losses represented 5.8% of total loans and 138% of past due loans at the end of 1Q10, while capital adequacy finished the quarter at 13.6% (Tier 1 ratio of 10.8%), higher than the 12.7% (Tier 1 ratio of 9.6%) reported at the end of 1Q09.
- Solid liquidity position: the ratio of net loans to deposits (including borrowings from development banks) was 92% at the end of 1Q10.
Well, you have 5 year revenue growth of over 30%. You have 12 month EPS growth of 27%...things seem to be moving along very nicely thank you very much.
Looking ahead, the bank seeks to expand its loan portfolio by extending larger lines of credit to an increasing number of retail and small-business clients, especially through credit cards. Such loans and credits carry higher interest rates and fee income than corporate loans.
Bancolombia is a bank with an important presence in the international capital markets and a leading participation in the Colombian market. It is one of very few Colombian companies listed on the NYSE. 97% of the Top 100 Colombian companies have banking relationships with CIB. Even with its overall growth, its asset quality is getting better, not worse. Colombia's banks are in relatively good shape. They played their hand more cautiously than U.S. banks, thus avoiding risky loans. Bancolombia raised its dividend in March.
Bancolombia is expecting the industry's loan portfolio to grow between 5% and 8% this year, which means it is most likely that CIB will outperform the market averages.
"The Colombian economy is growing," Bancolombia Chief Executive Jorge Londono Saldarriaga said at the earnings call Tuesday. "It's certainly growing faster than most of the people were expecting it to grow at the end of last year."
Betting on a global economic recovery? Then you better bet on Colombia. If you’re going to bet on Colombia, there’s no need to look elsewhere than CIB.
I am HUGE!!
$$$MR. MARKET$$$
Visit http://www.mrmarketishuge.com and let everyone know what you think of this stock pick.
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