Buying Opportunity: Stocks and ETFs Affected by Chile's Earthquake
The huge 8.8 magnitude earthquake that hit Chile this weekend could have short-term affects on stocks' potential winners and losers.
With Chile being the world’s number one producer of copper, the industrial metal surged over 5% on Monday, as supply disruptions sent the price higher. The iPath Dow Jones Copper ETN (JJC) tracks the price of copper and the PowerShares Base Metals ETF (DBB) is composed of one-third copper along with aluminum and zinc. The move will likely be a short-term move as production gets back on line quickly; however, I do own DBB for clients and I feel that it is a strong long-term commodity play.
- Sociedad Quimica y Minera de Chile (SQM)
One of the world’s leading fertilizer companies is also a major player in the lithium sector. The earthquake is not likely to have a large affect on the company, however any weakness from the natural disaster would be viewed as a buying opportunity. Our firm owns shares of SQM.
- Lan Airlines (LFL)
The Santiago-based airline stands to be directly impacted with airports in major Chilean cities closed for the majority of the weekend. The hope is that by early this week the flights into and out Santiago will be back to normal. Interesting is the strength of LFL versus its peers over the last year. Any weakness in LFL could be viewed as a buying opportunity.
- iShares MSCI Chile ETF (ECH)
The ETF is composed of a basket of 32 Chilean stocks with a heavy emphasis on utilities, materials, and industrials. There will be damage to the utilities infrastructure as lines are damaged, however the materials and industrials may benefit from an increased demand for their products and services.The ETF has been a strong single-country performer this year and any dip in the upcoming week should be met with buying. If you want to look at a utility company as a play, there is the Empresa Nacional Electricidad (EOC), a large utility based in Santiago. Technically speaking, the stock is a buy at current levels, but again let the weakness play out early in the week before buying.
Finally, there are two major Chile banks traded on American exchanges, Banco Santander Chile (SAN) and Banco de Chile (BCH). Both stocks hit all-time highs earlier this year and again weakness may be the opportunity needed to begin building a position.Remember, at the end of the day the most important issue is that the rescue efforts can save as many lives as possible in the affected areas. My prayers are with Chile.Disclosure: Author long SQM and DBBComplete Story »