Home > Stock Analysis

Betting On Brazil's Future

Posted: Nov 05, 2009 15:29 PM by Sham Gad

Tickers in this Article: CZZ, PDA, GE, KO, PBR, VALE

While investor awareness of Brazil is certainly viable, sometimes this country may suffer from hiding in China's wings. For obvious reasons, everyone mentions China, China, China when looking at investing abroad. However, Brazil is no sleeping giant; this resource-rich country has transformed itself into a nation exceptionally worthy of long-term investment consideration. Over the next six years, Brazil will host the two largest sporting events in the world: FIFA World Cup in 2014 and the Olympics in 2016.

Get Free Stock Analysis By Email

IN PICTURES: 20 Tools For Building Up Your Portfolio

Best To Bet On The Country
Unless you have the time and resources to visit with Brazilian businesses, most investors will find participating in Brazil's quality and well-established businesses a very productive way to benefit from this country's wonderful future. After all, one would have done exceedingly well betting on companies like Coca-Cola (NYSE: KO) and General Electric (NYSE: GE) some 50-60 years ago in the U.S.

For investors, Brazilian stocks are cheaper when compared to China and India, trading at an average of 13 times next year's earnings compared with 19 and 18.4 times for China and India, respectively. Clearly, Brazil's investing climate should be viewed with a greater degree of caution namely due to political risks. (For related reading, check out Go International With Foreign Index Funds.)

Titans Of Brazil
Brazil, like Latin America in general, is known for its abundant resources like arable land, water and other commodities. Petroleo Brasileiro (NYSE: PBR) is Brazil's largest oil company, trading at 14 times earnings. It was part of the huge oil discovery this year off the coast, considered one of the biggest in years. Cosan (NYSE: CZZ), a lesser-known company, makes and sells sugar and ethanol and trades for book value, although debt is a little higher than I would want. (For more, see Sugar: A Sweet Deal For Investors.)

Mining giant Vale (NYSE: VALE) is a great play on commodities in one of the most resource-rich nations. This $140 billion giant produces iron ore, aluminum, copper, coal and other lesser-known but essential commodities. Finally, Brasil Foods (NYSE: PDA) sells processed foods and is the major player in Brazil. The company is a combination of two Brazilian food rivals. It is a dominant producer of processed meats in Brazil, but its product line stretches from frozen vegetables to dairy to pizzas and lasagnas.

Here To Stay
Brazil's economy is expected to grow 3.5% in 2010, according to IMF estimates. It's a resource-rich country with a growing middle class. As long as the politics don't take a change for the worse, it should not be ignored from an investment perspective. (For related reading, see Forging Frontier Markets.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

By Sham Gad

Sham Gad is the Managing Partner of Gad Partners Fund's, value inspired investment partnerships modeled after the Buffett Partnerships of the 1950's. Previously, Gad ran the Gad Investment Group and delivered annualized returns of 22% from 2002 to 2005. Gad is also the author of "The Business of Value Investing" which will be out in the fall of 2009. Gad earned his MBA at the University of Georgia in May of 2007. Gad runs a value investing blog. He can also be reached by visiting the Gad Partners Funds site. When not writing or analyzing businesses, Gad enjoys hanging out with his wife Maggie, reading, golf, and yoga

Rate this Article: Your Rating: Overall Rating: Vote Now!

MORE STOCK ANALYSIS