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“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. The Colombian economy grew 3.96% during 2004. Exports and investment were the basis for the economic growth. In the meantime inflation is under control (5%..not bad for South America) and interest rates are low (7.1%). Colombia is also stuffing its coffers with the oil that it exports. Unemployment has dropped from nearly 20% to 11%.
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 have recovered from previous lows as the Colombian coffee industry pursues greater market shares in developed countries such as the United States. 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 21.88. I will sell it in 4 to 6 weeks at 25.20. Here is why I like CIB:
CIB’s stock is up over 225% in the last 12 months, yet its PE is still only around 12.4. 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: 42,954,279 (July 2005 est.)
Languages: Spanish
Literacy: definition: age 15 and over can read and write
total population: 92.5%
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: 531,100 bbl/day (2004 est.)
Oil - consumption: 252,000 bbl/day (2001 est.)
Imports - partners: US 30.6%, Venezuela 5.8%, Brazil 5.2%, Japan 5.2%, Germany 5.1%, Mexico 5%, China 4.2% (2004)
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 has soared 500% since President Alvaro Uribe was elected and is up 54% in U.S. dollar terms this year. A free trade pact with the U.S. is moving fast, undaunted by the recent battle over CAFTA. Uribe commands an amazing 80% approval rating from Colombians. 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.
Locally owned private-sector banks reported profits of COP1.068 trillion, up 46% from COP731.93 billion in the year-earlier period. 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 healthy since 2001.
Bancolombia (CIB), the country's largest bank, posted the highest earnings in the first six months of 2005, with net income of COP269.26 billion, up 43% on the year. Citigroup's (C) Citibank was the second-highest earner, with profits of COP53.69 billion, up from COP45.31 billion posted in the January-June period of 2004. Did you get that? CIB dusted Citibank. 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.
With $7.7 billion in assets, it has a 15% share of the country's financial services market, which has been growing more than twice as fast as the overall economy. The second largest bank, Banc de Bogota, has 9% market share. CIB will get a lot bigger, too. On July 30, it closed a three-way merger with two other Colombian banks: Conavi and Corfinsura.
With the merger, Bancolombia's market share is expected to grow to 22%. The company's total assets will increase 57%. The number of branches will soar to 680 from 385, and the number of retail and corporate clients will go to 5.2 million from 1.8 million. The combination will create one of the largest financial institutions in Latin America and a giant in the Colombian market.
Already, BanColombia has been boosting its lending to consumers and small and midsize companies. With a 27% return on equity, the bank has been enormously profitable. Post-merger, CIB could become the Citibank of Latin America.
Bancolombia is heavily reliant on the macroeconomic performance of its home country. Almost all its loans are made to Colombian debtors and 77% of its investments are engaged in Colombian government bonds. This has benefited the bank over the past several years. Therefore, the stable and improving economy has boosted revenue and earnings at Bancolombia. Its loan portfolio has grown 57% over the past two years as commercial and manufacturing firms have gained renewed confidence in the Columbian economy. Consumers are also increasing demand for borrowing and credit-card debt.
Yesterday CIB announced financial results for the quarter ended June 30, 2005. Net income increased 33.0% over the quarter and 45.7% over the year, amounting to US$ 0.507 per ADS, compared to a net income of US$ 0.375 per ADS for the previous quarter and US$ 0.300 per ADS, during the second quarter of 2004.
As of June 30, 2005, Bancolombia's net loans totaled Ps 10,656 billion, increasing 4.9% as compared to Ps 10,159 billion in the previous quarter. On a year-to-year basis, this represents an increase of 26.1% from Ps 8,454 billion at June 30, 2004.
So what kind of investment is CIB?
CIB has a price to pretax income 7.95 against the group’s median of 12.22. A lower price to pretax income ratio is effective in signaling undervaluation.
CIB’s P/E ratio is 12.4 versus the group’s median of 15.48.
In this industry an above average dividend yield indicates undervaluation and suggests the stock will outperform. CIB has a dividend yield of 3.10% versus the group’s median of 2.04%.
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 the only Colombian company 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. Bancolombia has grown its fees and income from services by 14%, year over year.
ANAL-ysts surveyed by First Call expect Bancolombia's 2005 earnings to decline 2% to $1.64 a share. They see earnings rising again next year by 17%. Sorry boys, you blew that one again. $$$MR. MARKET$$$ sees 2005 earnings at $2.08 and 2006 earnings at $2.52. At today’s PE multiple of 12.4, that projects to a stock price of 25.79 by the end of the year and a price of $31.25 in 2006. This doesn’t even take into account the fact that the PE multiple will expand once the rest of the world catches on that Colombia is not just for yayo anymore.
I am HUGE!!
$$$MR. MARKET$$$
Visit http://www.mrmarketishuge.com and let everyone know what you think of this stock pick.
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. The Colombian economy grew 3.96% during 2004. Exports and investment were the basis for the economic growth. In the meantime inflation is under control (5%..not bad for South America) and interest rates are low (7.1%). Colombia is also stuffing its coffers with the oil that it exports. Unemployment has dropped from nearly 20% to 11%.
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 have recovered from previous lows as the Colombian coffee industry pursues greater market shares in developed countries such as the United States. 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 21.88. I will sell it in 4 to 6 weeks at 25.20. Here is why I like CIB:
CIB’s stock is up over 225% in the last 12 months, yet its PE is still only around 12.4. 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: 42,954,279 (July 2005 est.)
Languages: Spanish
Literacy: definition: age 15 and over can read and write
total population: 92.5%
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: 531,100 bbl/day (2004 est.)
Oil - consumption: 252,000 bbl/day (2001 est.)
Imports - partners: US 30.6%, Venezuela 5.8%, Brazil 5.2%, Japan 5.2%, Germany 5.1%, Mexico 5%, China 4.2% (2004)
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 has soared 500% since President Alvaro Uribe was elected and is up 54% in U.S. dollar terms this year. A free trade pact with the U.S. is moving fast, undaunted by the recent battle over CAFTA. Uribe commands an amazing 80% approval rating from Colombians. 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.
Locally owned private-sector banks reported profits of COP1.068 trillion, up 46% from COP731.93 billion in the year-earlier period. 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 healthy since 2001.
Bancolombia (CIB), the country's largest bank, posted the highest earnings in the first six months of 2005, with net income of COP269.26 billion, up 43% on the year. Citigroup's (C) Citibank was the second-highest earner, with profits of COP53.69 billion, up from COP45.31 billion posted in the January-June period of 2004. Did you get that? CIB dusted Citibank. 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.
With $7.7 billion in assets, it has a 15% share of the country's financial services market, which has been growing more than twice as fast as the overall economy. The second largest bank, Banc de Bogota, has 9% market share. CIB will get a lot bigger, too. On July 30, it closed a three-way merger with two other Colombian banks: Conavi and Corfinsura.
With the merger, Bancolombia's market share is expected to grow to 22%. The company's total assets will increase 57%. The number of branches will soar to 680 from 385, and the number of retail and corporate clients will go to 5.2 million from 1.8 million. The combination will create one of the largest financial institutions in Latin America and a giant in the Colombian market.
Already, BanColombia has been boosting its lending to consumers and small and midsize companies. With a 27% return on equity, the bank has been enormously profitable. Post-merger, CIB could become the Citibank of Latin America.
Bancolombia is heavily reliant on the macroeconomic performance of its home country. Almost all its loans are made to Colombian debtors and 77% of its investments are engaged in Colombian government bonds. This has benefited the bank over the past several years. Therefore, the stable and improving economy has boosted revenue and earnings at Bancolombia. Its loan portfolio has grown 57% over the past two years as commercial and manufacturing firms have gained renewed confidence in the Columbian economy. Consumers are also increasing demand for borrowing and credit-card debt.
Yesterday CIB announced financial results for the quarter ended June 30, 2005. Net income increased 33.0% over the quarter and 45.7% over the year, amounting to US$ 0.507 per ADS, compared to a net income of US$ 0.375 per ADS for the previous quarter and US$ 0.300 per ADS, during the second quarter of 2004.
As of June 30, 2005, Bancolombia's net loans totaled Ps 10,656 billion, increasing 4.9% as compared to Ps 10,159 billion in the previous quarter. On a year-to-year basis, this represents an increase of 26.1% from Ps 8,454 billion at June 30, 2004.
So what kind of investment is CIB?
CIB has a price to pretax income 7.95 against the group’s median of 12.22. A lower price to pretax income ratio is effective in signaling undervaluation.
CIB’s P/E ratio is 12.4 versus the group’s median of 15.48.
In this industry an above average dividend yield indicates undervaluation and suggests the stock will outperform. CIB has a dividend yield of 3.10% versus the group’s median of 2.04%.
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 the only Colombian company 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. Bancolombia has grown its fees and income from services by 14%, year over year.
ANAL-ysts surveyed by First Call expect Bancolombia's 2005 earnings to decline 2% to $1.64 a share. They see earnings rising again next year by 17%. Sorry boys, you blew that one again. $$$MR. MARKET$$$ sees 2005 earnings at $2.08 and 2006 earnings at $2.52. At today’s PE multiple of 12.4, that projects to a stock price of 25.79 by the end of the year and a price of $31.25 in 2006. This doesn’t even take into account the fact that the PE multiple will expand once the rest of the world catches on that Colombia is not just for yayo anymore.
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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