Race is on to Cash in on Booming Hispanic Market

USA (By Sam Ali, Newhouse News Service) April 25, 2005 - Economists are fond of the saying "Demographics is destiny."

Wall Street knows a good numbers story when it sees one. And based on the numbers, it is clear the Hispanic market is hotter than Hispanic actress Eva Longoria.

Consider the demographic shift. Latinos represent the largest - and fastest-growing - minority group in the nation, and they have money to spend.

The Hispanic population, 40.4 million, is growing five times faster than the U.S. population as a whole, according to the Pew Hispanic Center, a Washington-based research firm. By 2050, one in four Americans will be of Hispanic descent.

Locally, the Hispanic population totaled 8,839 in Washtenaw County, or 3 percent of the population, according to Census 2000. That's up from 5,731 people of Hispanic descent living in the county in 1990. Livingston County also saw a growth in its Hispanic population during the decade, rising from 974 people in 1990 to 1,953 in 2000.

And as a consumer block, Hispanics wield $653 billion in purchasing power - a figure that exceeds the gross national product of Canada and one that is expected to jump to more than $1 trillion by 2008, according to the Selig Center for Economic Growth.

This population boom has triggered a rush of entrepreneurs, investors and top U.S. companies hoping to mine the exploding Latino consumer marketplace.

"Revenues of U.S. Hispanic companies are growing at an average rate of 20 percent a year - three times faster than the rest of corporate America," said Jay Garcia, managing director of New York-based Ramirez & Co., the nation's largest Hispanic-owned investment bank.

Garcia, who likens the sector to "an emerging market," created a Hispanic index - a collection of 10 stocks of Hispanic-owned or Hispanic-focused firms. Among the companies are Hispanic media giant Univision of Los Angeles, Hispanic health-care provider Molina Healthcare of Long Beach, Calif., and banking giant Banco Popular of San Juan, Puerto Rico.

The Ramirez Hispanic Index rose 24 percent in 2004, compared with 3 percent for the Dow Jones Industrial Average and 9 percent for the Standard & Poor's 500. The index has climbed 152 percent since its inception in 2000.

In February 2004, Ramirez & Co. launched a unit investment trust (ticker symbol: CRHIAX), a portfolio that invests in companies from the index.

"The Hispanic demographic is a very unique consumer base," Garcia said. "It sticks together because it has some common denominators and loyalty to its products and to its people."

Investors who want to add a splash of Latin flavor to their portfolios should follow the smart money: Wall Street's big guns have been focusing on health-care, financial and media companies that target Hispanic consumers, according to experts.

Philip Remek, a media analyst at Miami-based Guzman & Co., the first and only Hispanic-owned investment banking firm that's a member of the New York Stock Exchange, recommends buying stocks in Hispanic radio and television companies.

"The overall media industry is quite mature and there is little or no growth, but Spanish-language media companies are growing at a 10 percent clip and that has been drawing the interest of advertisers," Remek said.

Perhaps the best-known Hispanic media firm in the United States and the hands-down leader in Spanish-language broadcasting is Univision Communications. About 98 percent of the Latino population rely on Univision for their steady diet of telenovelas - mini soap operas - soccer and other programs in Spanish.

Univision's profit has grown an average 26 percent between 1999 and 2004, and revenue has climbed an average 20.9 percent during that same time period, Remek says.

The stock, however, which traded at more than $60 a share back in 2000, has been a bit sluggish. Univision shares lately have traded at less than half that amount.

"People used to have some pretty aggressive assumptions about Univision's future growth, but in 2001 it proved to be cyclical like all other media companies," Remek said. "Still, the five-year growth numbers are impressive."

Remek is more bullish on Grupo Televisa, Mexico's leading broadcaster. Televisa has a 10.8 percent stake in Univision and Remek notes Univision gets most of its programming from Televisa.

Grupo Televisa is the only media company in Remek's universe that sports an "outperform" rating.

Spanish-language newspapers are another niche getting increased investor scrutiny, particularly from private equity firms.

Bruce Eatroff, a partner at Halyard Capital in New York City, is part of a private investment group that has been busy snapping up Spanish-language dailies.

"We believe there is a great opportunity in Hispanic newspapers," he said. "They haven't seen the same kind of growth that we have seen in television and radio."

At least not yet, he says.

Investors would be remiss to focus just on companies with Hispanic roots, experts note.

The list of well-known U.S. brand-name firms, such as Avon, Bank of America and Kmart, catering to the Hispanic market is also growing.

Avon, the 116-year old cosmetics firm, has a Latina-geared cosmetics and accessories line and recently signed up Hayek, the actress, as the company's global pitchwoman.

Retailers are also setting their sights south of the border. Sears has a line of apparel named for Lucy Pereda, often described as the "Latina Martha Stewart." And Kmart has its own "Thalia" line of home goods, named for Hispanic soap opera and pop star Thalia Sodi.

Analysts say large banks with a high share of deposits in Hispanic havens such as New Jersey, New York, California, Texas and Florida are also worth considering.