One to Watch: Viva Latin America!

Published on Friday 11 December 2009 20:51

Banco Santander 11.17 -0.085 Scotsman says BUY

BANCO Santander operates principally in Spain, the UK, Portugal, Latin America and the United States. In the UK, it owns Alliance & Leicester and Abbey National, and the deposit and distribution channels of Bradford & Bingley.

The investment community views the banking sector with suspicion and concern. The latest upheavals in the Middle East have again brought into stark relief the risks that are part and parcel of any economic paradigm. Equally, however, it is essential that a bank operates in areas offering the best growth potential.

On the face of it, this would call into question Santander as an investment prospect. Spain's economic outlook is pretty dire, sitting alongside the UK at the back of the class as one of the world's worst performing economies, although it is not, in fact, within the G20, as our Prime Minister apparently believes. This rather bland assessment ignores Santander's exciting overseas potential, and particularly its exposure to Brazil.

The Royal Bank of Scotland was sunk below the water line by its hubris-inspired acquisition of the Dutch bank ABM Ambro's London and Asian operations. By contrast, Santander's purchase of the company's Brazilian subsidiary looks inspired. It now accounts for some quarter of the group's operating revenue and Brazil is no longer the economic and political wreck it once was.

There are problems, but the prospects are encouraging and should more than offset more pedestrian showings in Europe, although, as the UK building cycle revives, so Santander's high street operations should respond. The shares offer a yield of 6 per cent and, in addition, are a useful hedge if, as seems likely, sterling loses further ground against the Euro into the first two quarters of next year.

&#149 The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.

Asos

467.75p -3.5p

Broker says SELL

CHARLES Stanley has initiated coverage of internet clothing retailer Asos with a "sell" rating.

The broker said: "Our stance is primarily a valuation call.

"Asos is a very good company and may well turn out to be an excellent company and a long-term winner in the internet retail space."

Bovis

372.3p +7.1p

Broker says BUY

KILLIK & Co has initiated its coverage of Bovis with a "buy" rating.

Bovis is Killik's "preferred operator" in the housing market and the broker thinks its valuation more than makes up for uncertainty over the outlook for house prices in 2010. The long-term fundamentals of the UK housing market remain positive, Killik added.