FEMSA Following Its Plan, No Matter The Cost To Sentiment

There are a lot of things about FEMSA (NYSE:FMX) that I find interesting, but over the last two or three years, one of the most interesting things here is the growing gap between management's view of their strategic plan and the Street's view of that plan. FEMSA's management clearly sees value in allocating capital to a global conglomerate strategy, including a recent foray into European convenience stores, but the Street seems to prefer that the company just "stick to its knitting" and reinvest in proven operations.

You go against the Street at your own risk, at least in the short term, and FEMSA shares have continued to lag despite better-than-expected earnings so far this year and a reasonably healthy operating environment in Mexico and Latin America. With the local shares down about 20% and the ADRs down closer to 15% since my last update, valuation (adjusted) is at a multiyear low. I understand the Street's frustration, at least to a point, and there's definitely elevated execution and sentiment risk here, but I do see value here for investors patient enough to let management prove out its strategy.

 

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FEMSA Following Its Plan, No Matter The Cost To Sentiment