Ticker: EOCC, Buy below $23.
Why I Would Buy
1. Strong RoE – Enel Chile has generated double digit annual returns-on-equity during the past decade.
2. Cheap – Trades at less than 9 times earnings.
3. Dividend – Pays a 3+% dividend.
4. Defensive Investment – Regulated utility that generates and distributes power in large parts of Chile.
5. Currency Diversification – Earnings are in Chilean pesos, this provides an hedge against the dollar via a relatively stable currency.
What Could Go Wrong
1. Emerging Competition – Solar energy is emerging very strong in Chile with recent reports of surplus energy generation, this could pressure Enel’s hydro-electric and coal-fired generation.
2. Credit Ratings – Credit ratings are on the lower side of investment grade (BBB+ by Fitch and S&P).
3. Controlling Interest – Enel Italy owns 61% of this utility, interests of the parent may not always align with that of minority shareholders.
Disclosure: I am long EOCC, please read additional disclosures here before taking any action based on this post.