The Case For “Bargain” Brazilian Stocks

The Case For “Bargain” Brazilian Stocks
Andrew Rummer

over 2 years ago1 min

Brazilian stocks are looking very attractive thanks to growing profits, improving economic indicators, and cheap valuations, according to a report this week from investment firm Richard Bernstein Advisors

As the top panel in the chart above shows, the “forward” price-to-earnings (P/E) ratio for Brazilian stocks – how much they cost versus expected future profits – has dropped much faster than for stocks in China, the world’s largest emerging market. The lower panel shows how optimism on Brazil’s economy – indicated by the manufacturing purchasing managers' index (PMI) – is also looking much rosier. 

“Sharply accelerating profits, supportive leading indicators, and bargain valuations make Brazil and Latin America overall seem very attractive,” RBA concludes. “We anticipate that as Brazilian companies deliver on strong earnings growth, investors will become increasingly constructive on their equity prospects.”

Not everyone agrees with RBA’s assessment, however. Brazil’s economy and markets have been hit hard by the coronavirus pandemic and a recent drought. And a separate report from research firm TS Lombard on Thursday warned of accelerating inflation, power supply issues, and political uncertainty ahead of next year’s bid for re-election by President Jair Bolsonaro.

“Apparently aware that his re-election bid is becoming increasingly more difficult, Bolsonaro will continue to make waves ahead of the 2022 elections through populist moves,” TS Lombard wrote. “This means political uncertainty will persist, as will the President’s attacks on democratic institutions.”

Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG