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This Wide-Moat Mexican Airport Owner Is Appealing

Mexican domestic and international air traffic growth look quite strong, and we think Pacifico is a compelling opportunity.

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Chris Higgins: We recently took a deeper look at three Mexican airport companies: Sureste, Centro Norte, and Pacifico. All these airport operators offer investors the opportunity to invest in small-cap stocks with wide moats, a competitive advantage possessed by only 5% of the small-cap stocks Morningstar covers.

The active hurricane season, U.S. State Department travel warnings in August, and an earthquake near Mexico City have dampened air travel demand to certain locations, but Mexican domestic and international air traffic growth in 2017 still looks quite strong. We believe disruptions will be short lived. Our air travel model for Mexico generates 5.7% average annual air traffic growth from 2017 to 2021. Over the long term we believe underappreciated demographic trends in Mexico combined with a growing middle class will drive air traffic demand higher.

Chris Higgins does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.