Carl Delfeld for ETF XRAY submits: It should be no surprise to sophisticated global investors that many of the emerging-market country exchange traded funds are dominated by the top weighted companies in the index. But behind iShares MSCI Mexico Index (EEW) is the incredible story of one man, Mr. Carlos Slim, arguably the wealthiest man in the world.
In an excellent article in the Financial Times by Adam Thomson is a description of his empire that makes up more than a third of Mexico’s stock exchange index capitalization. According to Forbes, which last put his fortune at $53.1 billion, Mr. Slim’s net worth last year increased by $19 billion, or $52 million a day. That is one hell of a cash cow.
At the core of his empire are Telmex and América Móvil (AMX), his telecommunications giants. These two companies alone make up 35% of EWW.
Telmex dominates the landline telephone business in Mexico, accounting for more than 90% of the market. It is also extremely profitable: Thomson points out that every year it generates enough in top-line earnings to pay for its original acquisition price. Somehow Mr. Slim was able to persuade the Mexican government to allow him to enter the wireless market, a business he would later spin off into América Móvil, which he controls.
The company has increased its subscriber rate by an average of 65% a year since 2000, according to Mr. Slim, and now has more than 125 million clients in more than ten countries. The company obviously has been extremely active and successful in penetrating tough but lucrative emerging markets all over the world.
Companies like Telmex and America Movil are in many ways ETFs already being a basket of companies under one roof.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.