Seeking Alpha: Improving Traffic And Aggressive Capital Deployment Makes FEMSA An Intriguing Story

I can't complain about FEMSA's (NYSE:FMX) performance since my last write-up, as the U.S. ADRs of this leading Mexican retailer have risen more than 10%. Better still, the company's underlying financial performance has been pretty solid, and management has continued to deploy capital to support the long-term growth of the business.

I really like the company's expansion into Chile's drugstore sector, and I fully expect that FEMSA will follow it up with an expansion of its OXXO C-store concept into this under-penetrated country. I also expect further consolidation of the Mexican drugstore market, and I wouldn't be surprised if Coca-Cola FEMSA (NYSE:KOF) looks at a deal or two of its own. There is also the question of what FEMSA's management may elect to do with its Heineken (OTCQX:HEINY)(OTCQX:HKHHY) stake now that the lockup has expired and an acquisition of Heineken by SABMiller (OTCPK:SBMRY) is clearly off the table.

The "but" is that the move in the shares has mopped up a chunk of the undervaluation I saw back in the summer. I still like FEMSA as a long-term holding as I believe the company is on a trajectory to become one of, if not the, largest retailers south of the U.S. border over time. At this point, though, I would be inclined to advise new investors to hold off on building a full position in the hope that a market pullback would greater a bigger discount to full value.

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Improving Traffic And Aggressive Capital Deployment Makes FEMSA An Intriguing Story

The Motley Fool: FEMSA Hopes to Put a Tough Year Behind It

The past year was not a particularly strong one in the consumer sectors of Latin American countries like Mexico and Brazil, and that was not good news for FEMSA (NYSE: FMX  ) . One of Mexico's largest corporations, FEMSA has a significant presence in the retail/consumer world with its stake in Coca-Cola FEMSA (NYSE: KOF  ) , a large Latin American Coca-Cola bottler, a 20% stake in brewer Heineken, and ownership of Oxxo, the third-largest retailer in Mexico.

The challenge for investors is weighing out the short-term challenges presented by a possibly improving (but not yet strong) Mexican economy, new taxes, economic problems in Argentina and Venezuela, and competition against the long-term opportunity of growing Coca-Cola FEMSA and leveraging the retail operations into new areas like pharmacies and fast food that are still underpenetrated in Mexico.

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FEMSA Hopes to Put a Tough Year Behind It

Investopedia: Even When Coca-Cola Stumbles, It Does Okay

If this is what a bad quarter from Coca-Cola (NYSE:KO) looks like, it's not hard to see why the stock carries a rich multiple. Even in one of the weakest quarters in a long time (from a volume perspective), Coca-Cola did well with its margins. Add in the possibility of improving the company's global operations, particularly in fast-growing markets like China and Indonesia, and the long-term prospects still look pretty good. Alas, the stock still isn't anything close to “cheap” and is unlikely to become so anytime soon.

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http://www.investopedia.com/stock-analysis/071613/even-when-cocacola-stumbles-it-does-okay-ko-pep-kof-bud.aspx

Investopedia: Femsa Is A Delicate Balance Between Growth Opportunities And Valuation

As a business, I love Femsa (NYSE:FMX) (also sometimes spelled as FEMSA). This company is not only the co-owner of the second-largest Coca-Cola (NYSE:KO) bottler in the world, but it operates one of largest retail platform in Mexico and is now looking to expand into new retail markets and new geographies. On the other hand, however, excitement over Femsa's stock has got to a pretty fevered level recently before selling off, and while the company's prospects are quite good, the stock is not exactly a cheap option on that growth.

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http://www.investopedia.com/stock-analysis/060513/femsa-delicate-balance-between-growth-opportunities-and-valuation-fmx-ko-kof-mcd-c-yum.aspx

Seeking Alpha: FEMSA Just Keeps Rolling

Just about everything seems to be working in favor of FEMSA (FMX) these days. Not only have volumes and margins continued to improve in the Coca-Cola FEMSA (KOF) business, but the company's OXXO stores are lapping the competition in terms of comp-store growth. With new opportunities in Southeast Asia, pharmacies, and financial services, the growth outlook for this Mexican consumer conglomerate looks quite solid.

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FEMSA Just Keeps Rolling

Investopedia: Coca-Cola's OK Results Won't KO The Stock

Coca-Cola (NYSE:KO) is pretty nearly bulletproof, so a so-so fourth quarter report and unexciting guidance won't likely change anything. For investors who like Coca-Cola, nothing has really changed about the long-term opportunities in selling sugar water to the world; and for the bears on Coca-Cola, the shares will still look pricey relative to the expected cash flow growth.

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http://www.investopedia.com/stock-analysis/2013/Coca-Colas-OK-Results-Wont-KO-The-Stock-KO-PEP-MNST-KOF0214.aspx

Seeking Alpha: FEMSA May Just Be Getting Started

Mexico's FEMSA (FMX) has already accomplished quite a lot. Not only is Coca-Cola FEMSA (KOF) the second-largest Coca-Cola bottler in the world and the sole supplier of brands like Coke and Fanta to the world's second-largest soft drinks market (Mexico), but FEMSA also operates OXXO, one of the most profitable and well-run retail operations in Mexico. The stock certainly has reflected this success, with shares up nearly 50% over the past year and nearly 200% over the past five years, but shareholders may have even greater things to look forward to in the coming years.

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FEMSA May Just Be Getting Started

Seeking Alpha: FEMSA Richly Valued, But Rich In Growth Opportunities

Like most other emerging markets, 2011 was a disappointing year for Mexico. Despite a drop of worse than 20% in the Bolsa, consumer products concern FEMSA (FMX) had a quite a strong year. While FEMSA's stock is no longer a bargain, patient investors may yet see further growth in the company's core OXXO franchise as well as new growth initiatives and capital redeployments that could build meaningful long-term value.

The Future In C-Stores
Although FEMSA's interests in Coca-Cola FEMSA (KOF) and Heineken are nothing to ignore, the company's OXXO convenience store franchise is really the story right now. With over 9,000 stores and about 5% share of Mexico's food and convenience retail market, OXXO is the dominant C-store franchise in Mexico and one of the most profitable retailers in the region – surpassing the likes of WalMex (WMMVY.PK), Cencosud, and CBD (CBD).

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FEMSA Richly Valued, But Rich In Growth Opportunities

Seeking Alpha: Arcos Dorados - When Quality Meets Scarcity

Investors who want to play the significant improvement in the quality of life and buying power of consumers in Latin America are not exactly spoiled for choice. With regulatory burdens and costs making U.S. listings increasingly seem like more bother than they're worth, there is only a scant handful of direct consumer plays for the region.
That scarcity value alone would make Arcos Dorados (ARCO) interesting. But given that this large McDonald's (MCD) franchisee also happens to be delivering very solid growth as well, it is worth a look from investors looking to play the emerging consumer trend in Latin America.

Slinging a Lot More Burgers South of the Border
Arcos Dorados saw revenue jump nearly 29% on a reported basis for the second quarter, or nearly 19% on a constant currency basis. Same-store sales chipped in 15% growth, as the company continues to benefit from traffic and ticket growth across its operating geography.

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Arcos Dorados: When Quality Meets Scarcity