Investing In Brazil
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The broad numbers alone paint a very bullish picture for investors seeking undiscovered opportunities. But, as is the case with most macro trends, the devil is in the details. Pinpointing exactly where and why
At the Heart of
In that light, there are three specific Brazilian trends that investors should focus on first.
, China 's growing consumer class (the middle class is now 50% of the country's population) is just now getting a taste of consumerism, and they like it. Brazil
- Also like
, the infrastructure needs to be modernized, for a lot of reasons. One of them is simply that if it's not, the country will outgrow itself, its buildings, its utilities and its capacity. This also has to happen soon, as the 2014 soccer World Cup and the 2016 Summer Olympics will be held in China . Brazil has a whole lot of what the rest of the world wants - oil. The country struck black gold in 2008 when it found one of the world's largest oceanic oil fields in the Pre-Salt area off its coast. Brazil doesn't even need it though, as the country become oil self-sufficient in 2009 thanks to 85% of its power needs being met by renewable sources. Ergo, the bulk of that oil can be exported, and it's all controlled by one (partially government-owned) company called Petroleo Brasileiro, though you may know it better as Petrobras (NYSE:PBR). Brazil
How to Invest in
The growing need for infrastructure touches many industries, including housing, utilities, oil drilling, and oil refining just to name a few. The one common element among all of those groups is the need for steel to build such an infrastructure. That's good news for a company like Gerdau
Though Gerdau has yet to reclaim its profit levels seen in 2008, it's getting there. Better still, we've seen the company top earnings estimates for three straight quarters now; the market may be underestimating Gerdau's foreseeable future as well.
And lastly, the massive oil find in the Pre-Salt region may make Petrobras seem like the no-brainer choice. And, it may well be. The country's government has taken strong measures to make sure the bulk of the drilling and refining work is done by
It's certainly not cheap, priced at 20.5 times trailing earnings. Once Pre-Salt production hits its full stride after 2015 though, look out above.
In all three cases, it's unlikely investors will see explosive growth in the short run; each of these companies are poised to make measured progress over the next several years within one of three megatrends. The underpinnings of that long-term growth, however, are bigger than what investors may find anywhere else whether it's with these stocks, or just related ones. Either way, patience is still poised to pay off big-time for
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