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Another Great "Backdoor" Play

There's nothing we like better than discovering a "back" way into the current hot deal.

It's just so gratifying to find that sorta-secret way to bag profits from the IPO or merger that's dominating the headlines and that everyone you work with is so excited to talk about.

We did that for you with the Alibaba Holdings Inc. initial public stock offering (IPO). In our special research report, How to Make a Fast 153% From the Alibaba IPO, we give you three "backdoor" ways to profit from the upcoming stock offering of the China Internet giant.

Today we're coming back with a different "backdoor-profit-play" strategy.

This strategy offers an alternate way to profit from the already-announced $67.1 billion bid that AT&T Inc. (NYSE: T) has made for DirecTV (Nasdaq: DTV).

It's also a way to profit from the surprisingly strong tech sector that's emerging right next door…

The Action Is South of the Border

Mexico's push into high-tech makes a lot of sense. The country needs to attract foreign investment, and it wants to create high-value jobs and generate economic growth at a pace that greatly exceeds its richer neighbor to the north. But it wants to do all this using industries that don't create pollution or use too much water.

Tech fits the bill perfectly.

The area in and around Mexico City – the country's capital – is focusing on clean industrial development: call centers, information-technology (IT) operations, pharmaceutical research, and so-called "BPO" (business processing outsourcing) operations.

Indeed, Jose Merino, founder of Data4, a Mexico City-based multimedia startup, recently told Forbes writer Nathaniel Parish Flannery that, when it comes to high-tech and new media, "there's hardly a better country than Mexico. The number of engineers, quantitative social scientists, and programmers is really unparalleled."

Monterrey, an industrial outpost north of Mexico City, has emerged as the "capital of Mexico's programming scene," Flannery wrote. But Mexico City has a work force of nearly 4.5 million people – more than the entire population of Los Angeles. And its economy – worth an estimated $200 billion annually – ranks as the eighth-largest urban economy in the entire world.

According to Flannery, "Mexico City Mayor Miguel Mancera has also invested directly in the city's digital sector, drawing in IT and software professionals to a Laboratorio Para La Ciudad (Lab for the City) to help connect citizens to the government."

In short, Mexico is an economy – and a tech sector – that's on the rise.

In roughly the last decade, incomes in Mexico have increased some 60%, according to figures compiled by the World Bank. The agency says the country's gross national income (GNI) per capita was $16,140 in 2012, the last year for full data. That compares with $10,400 in 2003 – and is still well below the comparable figure of $52,340 for the United States.

But Mexico is moving in the right direction. Businesses from bakeries to the auto sector – which has created more than 100,000 new jobs there since 2010 – are calling Mexico home. In fact, auto companies now employ more folks in Mexico than they do in the U.S. rustbelt, where Detroit was once the world capital of car making.

The Mexican government obviously wants to keep this going.

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About the Author

Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.

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