FLMX is an opportunity for investors to add exposure to an area of the market that has been beaten up tremendously but is rebounding meaningfully. The fund is above its 200-day moving average but still has a below-average valuation.
“Mexico has been on fire year to date — this ETF is up 16%, blowing away what we’re seeing with the S&P at 4%, or even the QQQ, the NASDAQ 100, that’s up over 10%,” Lydon said. “On top of that, the P/E ratio is only 60% of what we’re seeing with the S&P 500.”
Lydon said it’s incredible how many publicly traded companies there are in Mexico and how diversified the constituents are in the country.
“On top of that, the trend is surely in place,” Lydon said. “I mean, you and I have spent some time in the last three months identifying the fact that, yeah, it’s been a great ten years for the S&P 500. But maybe the pendulum has swung, and they’re going to be not only other areas in the U.S., like mid caps and small caps, but also areas overseas that have the right valuation, have the right trends, and have the right opportunities where they may outperform the stalwart S&P 500.”
Investing in FLMX carries single-country risk, and Mexico’s overall market cap is smaller than the U.S. However, Lydon said in the U.S., even though there’s been a bit of a rebound off the lows that we saw in late October and early November, there hasn’t been a sustainable uptick where we have seen in some developed international countries, and also some emerging market countries like Mexico."
For investors looking to add exposure to a Mexico ETF, Lydon said the allocation is usually around seven to 10% of an emerging markets sleeve.
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