World Tour, Wall Street Style - Brazil
Some readers may be surprised to learn that
The Resource Wonder Twins
Most discussions about investing in
Unlike larger global oil rivals like ExxonMobil (NYSE:XOM) or BP (NYSE:BP), Petrobras is posting solid production growth and seems poised to continue to do so. While Petrobras raised a few eyebrows in years past for signing expensive-looking contracts with offshore drillers, those deals seem much lot more shrewd today with oil above $115 per barrel and solid discovery announcements in the recent past.
As for Vale, the central question is the direction of iron ore prices and, underlying that, the Chinese demand for iron ore. If you believe we're in a commodity super-cycle that will last for years, this could be a good one to watch on those inevitable dips and panics.
If you Want to Bank on
There are also ample options for investors looking to get involved in
All three of these banks present solid loan growth and returns on equity at present, but there are risks in valuation and credit losses. Of course, American investors have learned the hard lesson that you don't need to be banking in the BRIC countries to run into credit problems. After all, it wasn't lending to Brazilians that got Citigroup (NYSE:C) or Wachovia (NYSE:WB) into their current trouble. (Learn to break down the walls around researching financial institutions' financials, in our related article Analyzing A Bank's Financial Statements.)
If you Want to Buy Where the Brazilians buy
Should you want to invest in some companies whose profits depend a little more closely on the fortunes of individual Brazilians, you could investigate the likes of Companhia Brasileira de Distribuicao (CBD) (NYSE:CBD), Gafisa (NYSE:GFA) or Perdigao (NYSE:PDA).
Gafisa (a homebuilder) and Perdigao (a diversified meat and dairy company) could both be seen as plays on rising affluence for ordinary Brazilians. There has been a general trend across countries over time that rising affluence leads to demand for better housing and more protein in the diet, and both companies would seem poised to benefit.
And Now it's Your Turn
As is always the case, this is just a launching pad for your own research and due diligence. There are plenty of other worthy Brazilian ADRs to investigate, and I hope to pass this way again as I continue to evaluate foreign stocks for Investopedia readers.
For further reading, check out Investing Beyond Your Borders.