BlackRock
BlackRock Latin American Investment Trust plc

BlackRock Latin American Investment Trust plc share price, company news, analysis and interviews

The Company aims to secure long-term capital growth and an attractive total return primarily through investing in quoted securities in Latin America.

Website:

blackrock.com/uk/brla

Telephone: 0207 743 3000
Email: [email protected]

Useful Documents

Portfolio Managers

  • Christoph Brinkmann – Co-Manager
  • Sam Vecht – Co-Manager

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BlackRock Latin American Investment Trust plc share price

Fundamentals

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News

BlackRock Frontiers Investment Trust (LON:BRFI)

BlackRock Latin American Investment Trust declares interim dividend of 6.26 cents

BlackRock Latin American Investment Trust plc (LON:BRLA) has announced the third quarterly interim dividend in respect of the financial year to 31 December 2024 of 6.26 cents per ordinary share. The dividend is payable on 8 November 2024 to holders of ordinary shares on the register at the close of business on 11 October 2024 (ex-dividend date is 10 October 2024).

As set out in the Company’s dividend policy, this quarterly dividend has been calculated based on 1.25% of the Company’s NAV at close of business on 30 September 2024 (being the last business day of the calendar quarter) which was 500.96 cents per ordinary share.

To learn more about the BlackRock Latin American Investment Trust plc please follow this link: blackrock.com/uk/brla    

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BlackRock Frontiers Investment Trust (LON:BRFI)

BlackRock Latin American Investment Trust NAV rose +2.9%, significantly outperforming the benchmark

BlackRock Latin American Investment Trust plc (LON:BRLA) has announced its latest portfolio update.

All information is at 31 August 2024 and unaudited.

To learn more about the BlackRock Latin American Investment Trust plc please follow this link: blackrock.com/uk/brla     

Performance at month end with net income reinvested

  One
month
%
Three
months
%
One
year
%
Three
years
%
Five
years
%
Sterling:          
Net asset value^ 2.9 -7.2 -10.6 8.2 -1.5
Share price 0.3 -5.3 -9.4 12.2 4.1
MSCI EM Latin America
(Net Return)^^
0.2 -5.7 -3.2 15.4 5.1
US Dollars:          
Net asset value^ 5.2 -4.2 -7.3 3.3 6.4
Share price 2.6 -2.2 -6.0 7.1 12.4
MSCI EM Latin America
(Net Return)^^
2.6 -2.7 0.4 10.2 13.5

^cum income

^^The Company’s performance benchmark (the MSCI EM Latin America Index) may be calculated on either a Gross or a Net return basis. Net return (NR) indices calculate the reinvestment of dividends net of withholding taxes using the tax rates applicable to non-resident institutional investors, and hence give a lower total return than indices where calculations are on a Gross basis (which assumes that no withholding tax is suffered). As the Company is subject to withholding tax rates for the majority of countries in which it invests, the NR basis is felt to be the most accurate, appropriate, consistent and fair comparison for the Company.

Sources: BlackRock, Standard & Poor’s Micropal

At month end

Net asset value – capital only: 382.52p
Net asset value – including income: 387.29p
Share price: 344.00p
Total assets#: £122.7m
Discount (share price to cum income NAV): 11.2%
Average discount* over the month – cum income: 10.9%
Net Gearing at month end**: 8.6%
Gearing range (as a % of net assets): 0-25%
Net yield##: 6.3%
Ordinary shares in issue(excluding 2,181,662 shares held in treasury): 29,448,641
Ongoing charges***: 1.13%

#Total assets include current year revenue.

##The yield of 6.3% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 28.59 cents per share) and using a share price of 452.10 US cents per share (equivalent to the sterling price of 344.00 pence per share translated in to US cents at the rate prevailing at 31 August 2024 of $1.314 dollars to £1.00).

2023 Q3 Interim dividend of 7.02 cents per share (Paid on 09 November 2023)

2023 Q4 Interim dividend of 8.05 cents per share (Paid on 09 February 2024)

2024 Q1 Interim dividend of 7.39 cents per share (Paid on 13 May 2024)

2024 Q2 Interim dividend of 6.13 cents per share (Paid on 08 August 2024)

*The discount is calculated using the cum income NAV (expressed in sterling terms).

**Net cash/net gearing is calculated using debt at par, less cash and cash equivalents and fixed interest investments as a percentage of net assets.

*** The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation and certain non-recurring items for the year ended 31 December 2023.

Geographic Exposure % of Total Assets % of Equity Portfolio * MSCI EM Latin America Index
Brazil 60.0 59.5 61.3
Mexico 28.7 28.4 27.2
Chile 3.6 3.6 6.0
Multi-International 3.3 3.2 0.0
Colombia 2.0 2.0 1.4
Argentina 1.9 1.9 0.0
Panama 1.4 1.4 0.0
Peru 0.0 0.0 4.1
Net current Liabilities (inc. fixed interest) -0.9 0.0 0.0
  —– —– —–
Total 100.0 100.0 100.0
  ===== ===== =====

^Total assets for the purposes of these calculations exclude bank overdrafts, and the net current assets figure shown in the table above therefore excludes bank overdrafts equivalent to 7.6% of the Company’s net asset value.

Sector % of Equity Portfolio* % of Benchmark*
Financials 28.5 26.6
Materials 15.0 17.6
Industrials 14.6 9.6
Consumer Staples 13.6 15.8
Consumer Discretionary 9.6 2.3
Energy 8.5 13.1
Health Care 5.9 1.6
Real Estate 2.4 1.2
Information Technology 1.9 0.5
Communication Services 0.0 4.1
Utilities 0.0 7.6
  —– —–
Total 100.0 100.0
  ===== =====

*excluding net current assets & fixed interest

Company Country of Risk % of
Equity Portfolio
% of
Benchmark
Petrobrás: Brazil
   Equity 2.0
   Equity ADR 4.1 5.0
   Preference Shares ADR 2.4 5.9
Vale Brazil    
   ADS Brazil 6.5  
   Equity Brazil 0.8 6.4
Banco Bradesco: Brazil    
   Equity ADR   3.5 0.7
   Preference Shares   2.1 2.6
Grupo Financiero Banorte Mexico 5.3 3.2
Walmart de México y Centroamérica Mexico 5.0 3.0
B3 Brazil 4.7 2.2
Grupo Aeroportuario del Pacifico – ADS Mexico 4.4 1.2
Hapvida Participacoes Brazil 3.3 0.7
XP Brazil 2.9 0.0
Azza Consultancy Services Ltd Brazil 2.8 0.0

Commenting on the markets, Sam Vecht and Christoph Brinkmann, representing the Investment Manager noted;

The Company’s NAV rose +2.9% in August, significantly outperforming the benchmark, MSCI Emerging Markets Latin America Index, which returned +0.2% on a net basis over the same period. All performance figures are in sterling terms with dividends reinvested.1

Emerging markets posted modest gains of +1.6%, continuing to underperform Developed Markets (+2.5%). The month began with a sharp equity sell-off driven by two macro events: a weaker-than-expected US labour market report, raising recession fears, and a BOJ (Bank of Japan) rate hike that led to a sharp appreciation of the JPY and a carry trade unwind. This resulted in the largest intraday spike in the VIX (volatility index) since 1990. Despite these initial shocks, Emerging Markets recovered as US recession fears eased with better growth and inflation data. Latin America posted positive returns, outperforming GEM (Global Emerging Markets). The gains were primarily driven by strong performance in Brazil (6.7% m/m) and Chile (3.4% m/m), both of which outperformed Developed Markets . Argentina (off-index) was the best performer of the month, with a 16.3% m/m increase. Conversely, Mexico, Peru and Colombia underperformed the region. Despite positive returns in August, Latin America remains the worst-performing region year-to-date among global regions, down 12.6%.

At the portfolio level, our overweight and stock selection in Brazil and our stock picks in Mexico were the key positive contributors to performance. On the other hand, stock picking in Chile hurt us on the margin over the month.

From a security lens, IRB, the Brazilian reinsurance company, was the largest contributor over the month, reversing losses from July. an overweight position to Brazilian bank, Bradesco, was another significant contributor. The company reported a beat on 2Q earnings with a lower cost of risk. Renner, the Brazilian retailer, also helped returns after delivering strong 2Q results driven by earnings growth and improving sentiment around the company’s financial condition. Another strong performer was the Brazilian stock exchange B3. In addition to delivering a small beat on 2Q earnings, the stock also rose in tandem with the Brazilian market as it is a market proxy.

On the flipside, an overweight to Brazilian footwear manufacturer, Alpargatas, detracted, despite delivering strong second quarter results. We maintain conviction in the name and used the weakness to top up our position. The Mexican market fell more broadly, impacting beta sensitive stocks like Banorte, which was the second largest detractor to performance in August. An overweight position in Brazilian truck leasing company, Vamos, also detracted. Whilst 2Q results were a miss, we think the company is in a good position to grow given its high market share in untapped markets in Brazil.

We made some changes to the portfolio in August. We reduced overall exposure to Brazil, trimming into recent strength and taking profit on names like B3, Bradesco and Renner. Within Brazil, we also added to investment management platform XP and financial technology and software solutions provider, StoneCo. XP has made a lot of progress to make the business more efficient (in response to higher interest rates), while Stone is benefitting from cyclically strong payment volumes. We initiated a holding in Seatrium, a Singapore based engineering solutions provider which is building offshore oil equipment for Brazilian state-owned oil producer, Petrobras. Elsewhere, we added to gold miner, Franco-Nevada, which would benefit significantly from a restarting of the Cobre Panama copper mine.

Mexico is the largest portfolio overweight as at the end of August. Multi-country appears as our second largest overweight due to off-benchmark holdings in miner, Franco-Nevada and engineering solutions provider, Seatrium. On the other hand, we remain underweight in Peru due to its political and economic uncertainty. The second largest portfolio underweight is Chile.

Outlook

We remain optimistic about the outlook for Latin America. Central banks have been proactive in increasing interest rates to help control inflation, which has fallen significantly across the region. As such we have started to see central banks beginning to lower interest rates, which is supporting both economic activity and asset prices. In addition, the whole region is benefitting from being relatively isolated from global geopolitical conflicts. We believe that this will lead to both an increase in foreign direct investment and an increase in allocation from investors across the region.  

Brazil is the highlight of this thesis, with the central bank having already cut the policy rate considerably and economic activity improving strongly, while realized inflation remains benign. However, fiscal trends have disappointed in the first half of the year, which has led to higher inflation expectations and a sell-off in both the currency and interest rates. In response to this, the Brazilian central bank will likely pause its rate cutting cycle and instead hike interest rates in the short term to prevent the currency from selling off further. We remain comfortable with our equity positioning because the underlying earnings trends are positive, driven by the strong economic activity.

We remain positive on the outlook for the Mexican economy as it is a key beneficiary of the friend-shoring of global supply chains. Mexico remains defensive as both fiscal and the current accounts are in order. The outcome of the presidential elections in early June has created a lot of volatility for Mexican financial assets, with the Peso depreciating significantly. Investors are concerned that the landslide win of president-elect Sheinbaum and the Morena party will result in reduced checks and balances for the government. The passing of the controversial judicial reform in early September is a good example of this. We are certainly concerned about the implications of the reform for judicial independence. We have visited Mexico in the week after the election to meet with investors, business owners and political advisors. Our conclusion from that trip is that we believe the government will remain relatively pragmatic and fiscally prudent, as it has been during AMLO’s term. We have therefore used the market correction to add to certain positions.

We continue to closely monitor the political and economic situation in Argentina, after libertarian Javier Milei unexpectedly won the presidential elections in November 2023. Milei is facing a very difficult situation, with inflation around 270% year-on-year, FX reserves depleted and multiple economic imbalances. To further gauge sentiment on the ground, we travelled to the country in January 2024. The trip further instilled our cautious view on the economic outlook for the country, and we see no fundamental reasons as to why we would want to buy this market now. We have become incrementally more cautious on Argentina over the past month, as the weakening of the informal exchange rate suggests that the official exchange rate might be overvalued. Therefore, we see the risk of another exchange rate devaluation, which could reignite inflationary pressures.

The recent data in the United States supports our thesis that the US labour market is slowing down, enabling the Federal Reserve to start easing interest rates in September. This should be supportive for Emerging Market carry countries, including Latin America.

1Source: BlackRock, as of 31 August 2024.

To learn more about the BlackRock Latin American Investment Trust plc please follow this link: blackrock.com/uk/brla    

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Interviews

BlackRock Latin American Compelling Investment Opportunities with Edison Group (VIDEO)

BlackRock Latin American Investment Trust plc (LON:BRLA) is the topic of conversation when Edison Research Group Investment Trusts Content Director Milosz Papst talks to DirectorsTalk Interviews.

Milosz explains why investors might want to consider an allocation to Latin America, and why BlackRock Latin American Investment Trust in particular, how the fund is currently positioned, its dividend policy and how he views the company in terms of a valuation.

https://vimeo.com/886991848

BlackRock Latin American Investment Trust builds a carefully selected portfolio of the region’s most compelling investment opportunities with the aim of delivering long-term income and capital growth.

Edison’s team of 50-plus analysts produces award-winning, tier one-standard equity research and investment analysis.

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BlackRock Latin America strong start and attractive distribution policy (Analyst Interview)

BlackRock Latin American Investment Trust (LON:BRLA) is the topic of conversation when Sarah Godfrey, Director, Investment Trusts at Edison Group joins DirectorsTalk Interviews.

Sarah explains why investors should be looking at Latin America now, what this means for Black Rock Latin America in particular, the risks and other points investors should be looking at.

https://vimeo.com/688302684

The Company aims to secure long-term capital growth and an attractive total return primarily through investing in quoted securities in Latin America.

The BlackRock Latin American Investment Trust is all about maximising total returns. The trust invests at least 70% of its total assets in the equity securities of companies domiciled in, or exercising the predominant part of their economic activity in, Latin America.

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BlackRock Latin American big growth opportunity as countries develop home-grown solutions (Analyst Interview)

BlackRock Latin American Investment Trust plc (LON:BRLA) is the topic of conversation when Sarah Godfrey, Investment Companies Director at Edison Group joins DirectorsTalk Interview. Sarah explains why investors should consider an allocation to Latin America, what BlackRock Latin America offer investors, why technology and healthcare companies are particularly interesting, how BRLA has performed recently and how its closed-end structure means it can use gearing to invest.

https://vimeo.com/639854971

The BlackRock Latin American Investment Trust is all about maximising total returns. The trust invests at least 70% of its total assets in the equity securities of companies domiciled in, or exercising the predominant part of their economic activity in, Latin America.

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Question & Answers

BlackRock

BlackRock Latin American Investment Trust “investors can look forward to being rewarded with a cash return” says Edison

BlackRock Latin American Investment Trust plc (LON:BRLA) is the topic of conversation when Edison Group’s Investment Companies Directors Sarah Godfrey caught up with DirectorsTalk for an exclusive interview.

BlackRock Latin American Fund is all about maximizing total returns. The fund invests at least 70% of its total assets in the equity securities of companies domiciled in or exercising the predominant part of their economic activity in Latin America. Joining me today to discuss the fund is Edison Group Investment Companies Director, Sarah Godfrey.

Q1: First off, why should investors consider an allocation to Latin America?

A1: That’s really come about mostly because of the incredible rise of tech stocks in Asia, and particularly the Chinese internet-type stocks. Although obviously it’s not good to look at things from something like go down, therefore something would go up by default. The regulatory pressure on some of the Chinese internet stocks at the moment, it means that they might not be quite such an overwhelming part of the index in the future. Actually, Latin America has got some good emerging market fundamentals, young populations, a wealth of natural resources which are actually quite buoyant at the moment.

So, maybe a contrarian view to back a resurgence of Latin Am versus Asia, but it’s somewhere where investors are under-allocated and I think that that should reverse in the future.

Q2: So, what does BRLA offer investors?

A2: It’s very broad exposure to the region, it’s benchmark aware, it follows the MSCI Latin American Index, but it doesn’t track it so its exposures are within ranges plus or minus the index exposures, so that investors know that they’re getting exposure to a broad range of companies in Latin America. But, because it’s an actively managed fund backed up by BlackRock’s very deep research resources, then it gives investors access to some attractive themes in the region that you wouldn’t necessarily get with an index tracking fund.

So, for example, we talked about technology in Asia, in fact, there is some homegrown technology companies in Latin America that are currently a very small part of the index but could grow in the future. And also, healthcare companies, again, quite a small part of the index at the moment but have some attractive fundamentals.

Q3: Why are technology and healthcare companies particularly interesting to you then?

A3: Well, one of the things is they’re not particularly capital intensive, they are more intellectual property-driven or, in the case of healthcare, diagnostics, that kind of thing. There might be an initial investment in plant, but really a lot of it is about having enough people to service the needs of the customer base. Although in the West we’re talking very much about labour shortages and wage pressures being a driver of inflation, actually unemployment in Latin American region is rather higher which means that these companies can attract good people without facing some of those wage pressures that we’re seeing elsewhere in the world.

As I mentioned, they are currently quite a small part of the regional indices, if you look at developed markets, the weighting of technology and healthcare companies in a developed economy tends to be much higher and so, as these areas develop more homegrown solutions there’s arguably a pretty good runway for growth there.

Q4: We’ve talked about what Latin America has to offer, how has the Trust performed recently?


A4
: In the rebound from the worst of COVID pandemic last year, it’s put on, over the 12 months to the 30th of September which is the most recent month-end, share price total return of 18.5%, NAV total return of 21%. Now, that is a shade behind the index growth of 22.4%, but it’s broadly aligned with global equity markets and so, slightly behind the benchmark, but that underlines the fact that it isn’t an index tracking fund.

There was a bit of a hit from Brazil, just this morning, there’s news that senators are considering criminal charges a gainst President Bolsonaro in Brazil, his handling of the pandemic. His rather unique style of government has meant that some of the larger companies in Brazil might be seen as a source of funds for the government and therefore, some Brazilian companies have been hit and the fund has taken a bit of a knock there.

But, on the other hand, currently it’s overweight Mexico versus the Mexico allocation in the benchmark, and Mexican stocks have performed quite well and in particular, the Mexican stocks that BRLA owns have contributed positively to performance, which has meant largely offset those headwinds in Brazil.

Q5: Is there anything else investors should know about BlackRock Latin American Investment Trust?

A5: Well, as a closed-end fund, effectively an investment trust, it has the tools in the closed-end fund toolbox available to it, such as the ability to use gearing to borrow, to invest so currently, it’s got a little over 5% gearing. The managers have been putting that to work because company valuations in the region are actually looking pretty attractive at the moment across the region, an average price-earnings ratio of nine times, anything below 10 tends to sound quite attractive, historical average of 12 times, and 13 times for the broad Global Emerging Markets Index currently. So, there are potentially some good value opportunities there, which the managers are using the gearing to invest in and arguably increase their returns quite immediately from that.

The other thing is, it’s got quite an attractive distribution policy, so it pays out 1.25% of its NAV quarterly, so effectively 5% a year distribution policy. Some of that might come from capital, some of it will come from income and, because of recent slight pullback in the share price, which is down around about 10% over the last three months, that actually translates into a dividend yield of more than 6%, at the current share price.

So, regardless of the short-term picture in the markets, investors can look forward to being rewarded with a cash return that will beat anything they’ll get in a bank account or a bond fund at the moment.

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BlackRock

BlackRock Latin American Investment Trust Analyst Q&A: Why investors should consider Latin America (LON:BRLA)

BlackRock Latin American Investment Trust plc (LON:BRLA) is the topic of conversation when Edison Investment Research’s Investment Trust Analyst Sarah Godfrey caught up with DirectorsTalk for an exclusive interview.

Q1: Given the well documented impact of COVID-19 in the region, why would an investor want to consider Latin America now?

A1: They’ve had a bad time with COVID, particularly in Brazil, which is the region’s largest economy by far, but as they begin to recover and those vaccines are starting to roll out now, there’s a lot of stimulus around the world. So, there’s fiscal stimulus, government spending a lot of its focus on infrastructure and Latin America is a big producer of raw materials that can feed into that global infrastructure spend, iron ore and things like that.

In addition, as a collection of emerging economies, they are increasingly focused on domestic spending and the domestic economy and in common with the rest of the world, as things reopen people are going to be spending and things like shops and banks will start to do well.

In addition, Latin America has been very out of favour for quite a long time, it tends to run in pretty long cycles and so, it could be that the now is a reasonable time to get in, probably not at the bottom, but with the potential of an upswing that could last for several years.

Q2: What does BlackRock Latin American Investment Trust offer that you couldn’t get from say an ETF?

A2: Well, as I’ve already mentioned, Brazil is by far the largest economy in the region and it’s also very much the largest stock market so anybody who buys a Latin American index fund is going to be getting a lot of Brazil, 60% of the index, and a lot of Mexico.

As an actively managed fund, it does have some constraints in terms of how far over and underweight it can go versus the index but they’re that broad, they’re plus or minus 20 percentage points to the large markets and 10 for the smaller ones. So, you’ve got active managers who can express views on individual economies by holding more or less, just looking at the end of March figures, which I’ve got in front of me, they’re currently 5 percentage points underweight, Brazil, they’re overweight, Mexico, Chile, Argentina, which has just come back into the index.

They’re bottom up investors, they’re investing in profitable companies that aren’t necessarily the big index names, they base everything they do on really deep fundamental analysis. Also, the portfolio is quite concentrated, it’s only got 45 stocks so they can really focus down on what they feel are their best ideas in Latin America rather than holding everything and perhaps having some pretty low quality companies in there.

Q3: Is there more then to Latin America and indeed BRLA than commodities?

A3: Yes, absolutely, as I already kind of alluded to this earlier, the fund, they do focus on commodities, so their process is informed by the macro and and where they look at the macro, they look at what they call the four C’s and commodities is one of those. Iron ore, as I already mentioned, copper, lithium, which lithium has got strong demand from the battery electric vehicle market, pulp, and paper, they’re all big things, but not just commodities, but consumption, the rising disposable incomes across the region currencies. One thing that’s quite noticeable about Brazil in particular is a massive slide in the currency versus the US dollar and even more so versus Sterling because Sterling has been stronger over recent years, um, so they take that into account when they’re allocating their portfolio.

The four C’s is credit, as I say, they’re focusing on profitable companies with low debts but also looking at interest rates, which has come down hugely across the region. This leads into some themes that they’re currently looking at and so, very much away from the commodity space. There’s structural growth trends so there’s things that you wouldn’t necessarily think of e-commerce and software companies – there’s a software company in Argentina, which has done very well, healthcare, convenience stores, normal shopping – not high-end shopping.

Reinvestment opportunity leaders, that’s quality companies that generate economic value, there’s things in there, again, like technology digital payments, in a region where people aren’t necessarily close to the bank. Digital payments are rapidly growing in emerging markets, probably to a bigger extent than they are in developed markets because in a lot of cases, it’s not a shift it’s my first interactions with the formal banking network. Because I’m not used to going into a bank, but I’ve got a mobile phone, that’s a growing area.

Yes, material stocks, as I mentioned earlier,  the global infrastructure spend is positive for the region, the region has got a lot of resources and it’s a low cost producer so cement, that’s big in particularly Mexico, copper in Chile, lithium, as I mentioned, so batteries, pulp, and paper, that’s a Brazilian area and iron and steel.

Finally, mobility, mobility winners with positive asymmetry, they say, so that’s travel and so forth, cyclical companies that have been hit really hard during the pandemic and should benefit hugely from the reopening, as the vaccines roll out. So, things like airlines, real estate, and consumer discretionary so I mentioned earlier, convenience stores,  this will be more, perhaps, the higher end shopping.

Q4: So, now really is a good time to look at Latin America?

A4: Yes, I should also mention that BlackRock Latin American Investment Trust pays a dividend of 1.25% of NAV every quarter so that’s effectively 5% a year and although it is set as a percentage of the NAV, it’s not simply a return of capital,

It’s paid dividends for many years and only adopted this particular policy quite recently so now the dividends are paid in US dollars and in the most recent financial year, the dividend was 23.06 cents per share. Just to reiterate, that’s not all return of capital because the revenues in that year were 1486, so nearly 15 cents per share so it is generating a decent income as well as rewarding its shareholders with that yield.

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BlackRock

Blackrock Latin American Investment Trust Analyst Q&A with Edison Investment Research (LON:BRLA)

BlackRock Latin American Investment Trust plc (LON:BRLA) is the topic of conversation when Edison Investment Research’s Managing Director Rob Murphy caught up with DirectorsTalk for an exclusive interview.

Q1: I wanted you to talk to you today about Latin America as an area for investing, why would you say investors should be looking at Latin America right now?

A1: That’s a good question. We recently put out a note on a Latin American focus trust called ‘Finding opportunities across the region’ and that was talking about BlackRock Latin American Investment Trust.

When we talk about Latin America, it’s really dominated by three countries, Brazil is 64% of the index, Mexico is 21 and Chile is 7 so even Brazil and Mexico really dominating the index . These countries, in general, suffer quite heavily from COVID and as a result, Latin American equities are underperformed maybe by around 30% since the earlier parts of the year. That’s led to a big discount relative to other markets so the forward PE of Latin America is now only 13.4 times and that’s a discount of 31% to global markets. The average of Latin America is a 14% discount so you can see there’s quite a big valuation gap opening up at the moment so you could argue, this looks like an interesting entry point.

If you look at some of the fundamentals, if we take Brazil – the largest country – inflation is under control there now, they have reduced interest rates to around 2%, and there is a program of reforms over the next few years which include things like sanitation, administration, infrastructure partnerships and potentially tax reforms. They’ve also been keeping spending in check, they’ve kept public sector pay down and that should support the currency, which is the Real in Brazil.

The other thing to look at as well is China, we had some good numbers actually out today showing China’s growth continuing to pick up and China, as we know, is a big consumer of commodities and Brazil is obviously a large producer of commodities. So, you’re actually getting exposure to the recovery of China through Latin America as well and we’re seeing that in the revisions to GDP in Brazil where the recovery is coming through a bit faster than expected and growth rates, although negative, have been revised upwards.

Q2: So, what is BRLA’s approach to invest in Latin America?

A2: BRLA is being co-managed by Sam Vecht and Ed Kuczma from the BlackRock Emerging Markets and LatAm equities team and the aim of that is to generate long term capital growth and an attractive total return. It’s actually the only pure equity investment trust that focuses on Latin America as the nearest peer actually also has quite a significant bond allocation.

The process that BRLA is really a very bottom up process so looking at the stock specifics but with a macro overlay and that’s leads to a relatively high conviction portfolio of about 45 stocks and they look for good long term growth prospects, strong cash flow, good balance sheets, good management and all at a reasonable valuation. So, they’re not necessarily looking for the cheapest stocks out there but they want to make sure that they get decent upside in the stocks that they choose. They ESG as a key part of their investment process as well.

In terms of the macro side so the things they look at there are what they call the four C’s. So, they look at consumption which will tend to benefit from lower interest rates, GDP recovery, commodities, again that’s driven by China and GDP, currencies affected by economic reforms and potentially dollar weakness and credit. So, is there liquidity in the economies and we have seen actually reasonably good liquidity injection across Latin America.

In terms of the actual stock themes they look at, they have structural growth areas which would include e-commerce, healthcare, software companies, benefits of restructuring and reforms such as state owned enterprises like Petrobras and bond proxies at a reasonable valuation, which again would benefit from falling interest rates and companies that have a high yield but also with low leverage that can generate a good income.

They tend to be quite active as well with their use of gearing in the trust so they’re view of a neutral gearing would be about 5%, currently they’re running at about 8 and they they’re quite active in moving that around to take advantage of opportunities. To give you an idea, the gearing in February was around 5% and that went up to 10% in April so they took advantage of the weaker markets.

In terms of currencies, it’s quite interesting that typically Brazil’s equity market can actually go up by 50% also on average during periods of extended dollar weakness

So, they have quite an interesting outlook at the moment for the trust.

Q3: Now, as you said, it’s run by two ages, Edward, and Sam and it’s a good time now so what have they been doing to change the portfolio recently?

A3: Well, they’re what they describe as cautiously optimistic currently, you are seeing the COVID curves beginning to flatten and we’re seeing the growth in China coming through.

What they’ve done over the last 12 months is they’ve significantly increased their weightings in consumer discretionary and materials companies and all other sectors actually have been reduced especially financials, consumer staples, and also energy to some degree. As I mentioned just before, they increased their gearing in April to 10% from only 5 back in February.

The kind of companies they’re buying so as an example:

  • Locamerica which is a corporate fleet hire business, that should benefit from GDP growth as companies recover and are able to spend more on growing their businesses.
  • Rumo, the railroad company, that will benefit from again, transportation of commodities through to the ports.
  • Afya which is a medical school education business that actually Brazil has a low number of doctors relatively so that positions them quite well for longer term growth.
  • Via Varejo which is a retailer but that’s shifting its business online quite quickly

It’s also worth mentioning there’s quite a strong IPO pipeline in Brazil, especially at the moment and they bought into Vasta Platform, which is a primary, secondary educational technology provider.

The things they’ve sold, I think clearly things like healthcare companies which have become quite expensive and a food manufacturer where you’ve seen sort of rising wheat prices, pressure margins.

So overall they’ve been moving the portfolio, I would say to, more recovery and some longer term growth themes.

Q4: How would you say the Blackrock Latin American Investment Trust is positioned and who might it appeal to?

A4: Well, the trust is definitely positioned for a global recovery as we get through to next year and hopefully COVID continues to come under control. Latin America is a big producer of commodities and demand for those will grow as economies recover.

It’s also positioned to some longer term growth themes, as I mentioned, and so you get a sort of a combination there, we know that they’re looking for quality businesses so they have strong controls over the risk of the portfolio as well.

The sort of people that would appeal to, investors, if you’re looking for a good investment which will benefit from a turnaround in global economy, continued growth in China but also in emerging markets, some of the developments of many of these e-commerce and healthcare businesses which have a lot of potential to grow in the future.

It’s also worth saying actually that the trust pays a 1.25% dividend based on NAV which is sort of 5% annualised and that dividend is strongly covered by distributable reserves of $150 million. So, if you annualise that dividend, it’s something like 17 times covered by those reserves so you actually get quite a nice income as well as the potential for capital growth.

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Analyst Notes & Comments

BlackRock Latin America strong start and attractive distribution policy (Analyst Interview)

BlackRock Latin American Investment Trust (LON:BRLA) is the topic of conversation when Sarah Godfrey, Director, Investment Trusts at Edison Group joins DirectorsTalk Interviews.

Sarah explains why investors should be looking at Latin America now, what this means for Black Rock Latin America in particular, the risks and other points investors should be looking at.

https://vimeo.com/688302684

The Company aims to secure long-term capital growth and an attractive total return primarily through investing in quoted securities in Latin America.

The BlackRock Latin American Investment Trust is all about maximising total returns. The trust invests at least 70% of its total assets in the equity securities of companies domiciled in, or exercising the predominant part of their economic activity in, Latin America.

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BlackRock

BlackRock Latin American Investment Trust “Strong start to the year for Latin America”

BlackRock Latin American Investment Trust plc (LON:BRLA) two experienced managers, Ed Kuczma and Sam Vecht, remain positive on the outlook for Latin American equities, with Kuczma commenting that the region is ‘under-owned, undervalued and unloved’. He says that the year-to-date stock market rally in Latin America is a good example of how quickly investor sentiment can change, especially given the global environment of rising interest rates. Kuczma points to the move from growth to value stocks, commenting that the region ‘has a ton of value’.

To learn more about the BlackRock Latin American Investment Trust plc please follow this link: blackrock.com/uk/brla     

Edison Investment Research Analyst Mel Jenner says

The Latin American stock market has had a very strong relative start to the year, led by Brazil, as investors have reassessed the region’s prospects. As at 28 February 2022, the MSCI Emerging Markets Latin America Index had appreciated by 13.6% year-to-date, while the MSCI World Index had declined by 6.8% (both in sterling terms). There is potential for this outperformance to continue, particularly in a rising interest rate environment, which traditionally favours value rather than growth stocks. The MSCI Emerging Markets Latin America Index is biased towards value sectors, with materials, financials and energy stocks representing c 60% of the total. BRLA’s managers focus on quality companies and the trust has favourable relative attributes. BRLA is trading on a forward P/E multiple of 14.0x versus 15.5x for the index. The trust’s estimated earnings growth for 2022 is mid-teens compared with a consensus 8% for the Latin American market, while the portfolio’s return on equity of c 16% is meaningfully above the market’s c 11%.

Discount in narrowing trend since September 2021

BRLA’s discount has narrowed since September 2021, perhaps in anticipation of the proposed tender offer (details on pages five and six). The share price is currently at a 6.7% discount to cum-income net asset value (NAV) versus a discount ranging between 5.0% and 14.4% over the last 12 months. Over the last one, three, five and 10 years the share price discount has ranged between 9.7% and 11.7%. BRLA offers an attractive 5.2% dividend yield, which is based on 1.25% of the trust’s quarterly NAV.

BlackRock Latin American Investment Trust aims to secure long-term capital growth and an attractive total return primarily through investing in quoted securities in Latin America.  

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BlackRock Latin American big growth opportunity as countries develop home-grown solutions (Analyst Interview)

BlackRock Latin American Investment Trust plc (LON:BRLA) is the topic of conversation when Sarah Godfrey, Investment Companies Director at Edison Group joins DirectorsTalk Interview. Sarah explains why investors should consider an allocation to Latin America, what BlackRock Latin America offer investors, why technology and healthcare companies are particularly interesting, how BRLA has performed recently and how its closed-end structure means it can use gearing to invest.

https://vimeo.com/639854971

The BlackRock Latin American Investment Trust is all about maximising total returns. The trust invests at least 70% of its total assets in the equity securities of companies domiciled in, or exercising the predominant part of their economic activity in, Latin America.

Read More »

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