There was a lot of talk about potential host cities for the Olympics lately and the politics associated. That talk died down after Brazil was awarded the honor of hosting. You may be asking "how does that relate to trading"…well my friend Raul of the Shocked Investor is about to make that connection. He has been researching the Brazilian stocks and options recently and more importantly ones traded on American exchanges. Enjoy the article and be sure to leave a comment with your thoughts.
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With Rio de Janeiro having just being awarded the Olympics 2016 there will be enormous activity and interest in Brazil. There will be tremendous investments made in the city and in the country. Whether the government itself makes a profit money-wise is a difficult proposition, and difficult to measure. However, the benefits to the country are long term and in many other indirect areas. Many companies and sectors will certainly boom and make considerable revenue. Over the next months and years we will dedicate considerable effort to dissecting these companies and sectors to pinpoint the winners. Also, in future posts, we will be talking about other companies, while not directly Brazilian ADRs, but that do most of their business - of profits - in Brazil. I know these companies and the market well, and have very good connections over there. Much more on this later. Also, please see another recent post on Brazil on September 23, with expert interviews on BNN TV.
This article shows all the current Brazilian ADRs. These are securities that can be traded in North America, like regular stocks. Most have good volumes, and most of them have options as well. Some of the companies are very large and are among the biggest in the world. For example, ITUB has a market cap of over $90B, much higher than most banks in the world. VALE is at $120B, VIV $10B, ABV, $52B, BBD $61B, and so on.
Two ETFs are also shown, EWZ for Brazilian stocks, and BZF which tracks the Brazilian currency. You will see that these stocks have gone up sharply this year. The EWZ is up over 93%, partly due to the appreciation of the Real and the drop of the U.S. Dollar. The top gainer year-to-date is a builder, whose shares (ADRS) have gone up nearly 200%. Other companies have gone up over 200% in the last 6 months. Their RSI values are stratospheric, so this is clearly a ‘buyer beware' situation. If there is the long-awaited correction in the stock market and another safety flight to the U.S. Dollar occurs, these stocks could well be severely punished. There will be many opportunities for the patient investor.
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This weekend, Brazil just reported an 8th consecutive increase in industrial production:
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The economy is not immune to the global crisis. However, the increase of its internal market, as well as its diversification of exports (China is now its largest export market) has certainly helped its resiliency. Overall production in 2009, however, is still down 12% compared with 2008.
Most of these companies with ADRs are world-class and leaders in their field. Names such as Petrobras, Vale do Rio Doce do not need introduction. Most are extremely reputable and well-managed companies.
We also maintain sites that track live all ADRs in Latin-America, as well as all global currency ETFs and ETNs. Click on the links to view intra-day prices and YTD charts.
COMPANIES AND ETFS, AND THEIR SECTORS
Note that all the Brazilian companies in the S&P Latin American 40 index are included in the group above. All these companies also trade in the Bovespa, Sao Paulo's stock exchange (4th largest in the world).
List of ADRs, ETFs, company names, and their sectors:
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PERFORMANCE
Performance since Jan 2008, Jan 2009, last 6 months, 3 months, and 1 month:
YTD Chart:
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RSI VALUES
Below is the current table of RSI7 values (daily, weekly, and monthy) for all Brazilian ADRS plus the ETFs. The average values for the ADRs are:
daily: 58.2
weekly: 72.5
monthly: 64.6
The weekly is overbought, the monthly almost, and the daily is quite high. Note that for EWZ the values are 64/80/76, slightly higher than the average of all the companies. The top holdings of the ETF are included in the above list, but it's not a perfect match.
Note that sell alerts were triggered for ELP and PDA. These are the RSI7s:
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As you can see, many of the stocks are clearly overbought.
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PRICE/EARNINGS RATIO
The table below shows the trailing and forward Price/Earnings ratios from various sources.
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AVAILABILITY OF OPTIONS
The use of stock options is very important to reduce cost basis (by selling calls and puts) as well as for protection. In addition, options and LEAPS (long term options) allow for leverage on the stock price. If you believe these stocks will continue to rise into the far future, then buying LEAPS can be quite attractive. Selling them (or short term options) allows for good income generation. There are many other strategies that can be used with options. With regards to the Brazilian ADRs, these strategies will be discussed in more detail in future posts.
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COMPANY ANALYSIS & DETAILS
This section lists all companies, provides a business description, summary of financials, and analyst recomendations where available.
ABV, Ambev
Companhia de Bebidas das Americas – AmBev engages in the production, distribution, and sale of beer, draft beer, malt, carbonated soft drinks, and other non-alcoholic and non-carbonated products in the Americas. It also sells bottled water, isotonics, and ready-to-drink teas. The company primarily offers its products under the Skol, Brahma, and Antarctica brand names. Companhia de Bebidas das Americas has a licensing agreement with Anheuser-Busch, Inc. to produce, bottle, sell, and distribute Budweiser products in Canada. It distributes its products through third-party distributors and direct distribution centers. The company was founded in 1888 and is headquartered in Sao Paulo, Brazil. Companhia de Bebidas das Americas – AmBev is a subsidiary of Interbrew International B.V.
Market Cap (intraday): 51.84B
Enterprise Value (3-Oct-09): 54.37B
Trailing P/E (ttm, intraday): 24.49
Forward P/E (fye 31-Dec-10): 15.14
PEG Ratio (5 yr expected): 1.24
Price/Sales (ttm): 4.06
Price/Book (mrq): 4.22
Enterprise Value/Revenue (ttm): 4.34
Enterprise Value/EBITDA (ttm): 9.957
ARA, Aracruz
As of August 26, 2009, Aracruz Celulose S.A. was acquired by Votorantim Celulose e Papel S.A. (please see VCP), creating Fibria. Aracruz Celulose S.A. engages in the production and sale of bleached hardwood kraft market pulp. It produces eucalyptus pulp, a hardwood pulp used by paper manufacturers to produce various products, including premium tissue, printing and writing papers, liquid packaging board, and specialty papers. Aracruz sells its products in North America, Western Europe, Asia, and Brazil. The company was founded in 1967 and is headquartered in Aracruz, Brazil.
Market Cap (intraday): 22.42B
Enterprise Value (3-Oct-09): 26.39B
Trailing P/E (ttm, intraday): N/A
Forward P/E (fye 31-Dec-10): 18.28
PEG Ratio (5 yr expected): N/A
Price/Sales (ttm): 10.82
Price/Book (mrq): 24.63
Enterprise Value/Revenue (ttm): 13.09
Enterprise Value/EBITDA (ttm): 47.582
BAK, Braskem
Braskem S.A., together with its subsidiaries, operates as an integrated petrochemical cracker and thermoplastics producer primarily in Brazil. It offers olefins, such as ethylene, polymer and chemical grade propylene, butadiene, isoprene, and butene-1; aromatics comprising benzene, toluene, para-xylene, ortho-xylene, and mixed xylene; caprolactam, cyclohexane, cyclohexanone, and ammonium sulfate; automotive gasoline and liquefied petroleum gas; and methyl tertiary butyl ether, solvent C9, and pyrolysis C9 primarily for manufacturing intermediate second generation petrochemical products. The company also produces electric power, steam, compressed air, and purified drinking and demineralized water. In addition, it offers polyethylene and polypropylene for use in consumer and industrial applications, such as plastic films for food and industrial packaging, bottles, shopping bags and other consumer goods containers, automotive parts, and household appliances. Further, the company engages in producing suspension polyvinylchloride (PVC) for the manufacture of pipes, fittings, laminated products, shoes, sheeting, flooring, cable insulation, electrical conduit, packaging, and medical applications; paste PVC for producing toys, synthetic leather, flooring materials, bottle caps and seals, automobile corrosion prevention treatments, and wallpaper coatings; ethylene dichloride for the manufacture of PVC; and caustic soda for aluminum, pulp and paper, petrochemicals and other chemicals, soaps and detergents, and waste treatment plants applications. Additionally, it distributes chemical and petrochemical products comprising solvents, such as aliphatic, aromatic, synthetic, and ecological solvents; polymers; and general purpose chemicals, which include process oils, chemical intermediates, blends, specialty chemicals, pharmaceuticals, and santoprene. The company, formerly known as Copene Petroquimica do Nordeste S.A., was founded in 1972 and is headquartered in Camacari, Brazil.
Market Cap (intraday): 6.37B
Enterprise Value (3-Oct-09): 10.54B
Trailing P/E (ttm, intraday): N/A
Forward P/E (fye 31-Dec-10): 29.95
PEG Ratio (5 yr expected): N/A
Price/Sales (ttm): 0.7
Price/Book (mrq): 2.24
Enterprise Value/Revenue (ttm): 1.17
Enterprise Value/EBITDA (ttm): 8.5
BBD, Bradesco
Banco Bradesco S.A. provides a range of banking and financial products and services to individuals, small to mid-sized companies, and local and international corporations and institutions. It operates in two segments, Banking, and Insurance, Pension Plans, and Certificated Savings Plans. The Banking segment comprises deposit taking activities, including checking accounts, investment deposit accounts, traditional savings accounts, time deposits, and interbank deposits; individual and corporate banking services, credit operations, real estate financing, agricultural loans, leasing operations, credit and debit card services, leasing operations, investment banking, international banking, asset management, and consortium services. The Insurance, Pension Plans, and Certificated Savings Plans segment offers various products and services, including life and personal accident and occasional events insurance; health and dental care insurance; automobile insurance; property and casualty insurance; individual and corporate pension plans; certified savings plans; and pension investment contracts. As of December 31, 2008, Banco Bradesco S.A. operated a network of 3,359 branches; 29,218 ATMs; and 3,738 special banking service posts and outlets in Brazil. It also operated five branches and seven subsidiaries in New York, London, the Cayman Islands, the Bahamas, Japan, Hong Kong, Argentina, and Luxembourg. The company was formerly known as Banco Brasileiro de Descontos S.A. Banco Bradesco S.A. was founded in 1943 and is headquartered in Osasco, Brazil.
Market Cap (intraday): 61.21B
Enterprise Value (3-Oct-09): 101.36B
Trailing P/E (ttm, intraday): 19.55
Forward P/E (fye 31-Dec-10): 13.85
PEG Ratio (5 yr expected): 1.58
Price/Sales (ttm): 1.97
Price/Book (mrq): 2.85
Enterprise Value/Revenue (ttm): 3.35
Enterprise Value/EBITDA (ttm): N/A
BRP, Brasil Telecom S.A.
Brasil Telecom Participacoes S.A., through its subsidiaries, provides telecommunications services in Brazil. The company offers fixed-line telecommunications services, including local and long-distance, network usage, and public telephones services; mobile telecommunications services; and data transmission services, as well as operates an Internet portal under the brand name ‘iG'. It also provides traffic transportation services; value-added services, such as voicemail, caller ID, and directory assistance; and voice services to corporate customers. The company's local fixed-line services include installation, monthly subscription, metered services, collect calls, and supplemental local services; and data transmission services comprise ADSL services and IP solutions, as well as the lease of dedicated digital and analog lines to other telecommunications services providers and ISPs, and corporate customers. As of December 31, 2008, it had approximately 8.1 million fixed lines in service; and 227,900 public telephones in service. The company was founded in 1998 and is based in Brasilia, Brazil. As of January 8, 2009, Brasil Telecom Participacoes S.A. operates as a subsidiary of Telemar Norte Leste S.A.
Market Cap (intraday): 3.79B
Enterprise Value (3-Oct-09): 5.45B
Trailing P/E (ttm, intraday): N/A
Forward P/E (fye 31-Dec-10): N/A
PEG Ratio (5 yr expected): N/A
Price/Sales (ttm): 0.59
Price/Book (mrq): 1.23
Enterprise Value/Revenue (ttm): 0.88
Enterprise Value/EBITDA (ttm): 4.78
BTM, Brasil Telecom
Brasil Telecom S.A., through its subsidiaries, provides telecommunications services for residential customers and governmental agencies, as well as small, medium, and large companies in Brazil. The company offers local fixed-line services, including installation, monthly subscription, metered services, collect calls, in dialing, and supplemental local services; domestic and international long distance services; fixed line to fixed line services; mobile long distance services; mobile telecommunication services; and data transmission services. It also provides broadband services, such as high-speed Internet access; Internet service provider services; commercial data transmission services comprising industrial exploitation of dedicated lines, dedicated line, and frame relay; public telephone services; and traffic transportation services. In addition, the company offers value-added services, which include voice, text, and data applications consisting of voicemail and caller ID, as well as other services, such as personalization, short message service subscription, chat, mobile television, location-based, mobile banking, mobile search, email, and instant messaging; and provides private telecommunication services through local optical fiber digital networks. Further, it provides call center services for third parties, including customer service, outbound and inbound telemarketing, training, support, consulting, and related services; and operates an Internet portal. As of December 31, 2008, Brasil Telecom had approximately 227,900 public telephones, and its access network served approximately 8.1 million fixed-line subscribers and approximately 1.8 million asymmetric digital subscriber line subscribers. The company was founded in 1963 and is headquartered in Brasília, Brazil.
Market Cap (intraday): 4.78M
Enterprise Value (3-Oct-09): 1.80B
Trailing P/E (ttm, intraday): N/A
Forward P/E (fye 31-Dec-10): N/A
PEG Ratio (5 yr expected): N/A
Price/Sales (ttm): 0
Price/Book (mrq): 0
Enterprise Value/Revenue (ttm): 0.29
Enterprise Value/EBITDA (ttm): 1.763
CBD, Companhia Brasileira de Distribuicao
Companhia Brasileira de Distribuicao operates as a retailer of food, clothing, home appliances, and other products through its chain of hypermarkets, supermarkets, and specialized and department stores primarily in Brazil. The company operates its stores under the names Pao de Acucar, CompreBem, Extra, Extra Eletro, Extra Perto, Extra Facil, Sendas, and Assai. As of December 31, 2008, it operated 597 stores. The company was founded in 1948 and is based in Sao Paulo, Brazil.
Market Cap (intraday): 13.37M
Enterprise Value (3-Oct-09): 1.11B
Trailing P/E (ttm, intraday): 0.06
Forward P/E (fye 31-Dec-10): 24.85
PEG Ratio (5 yr expected): 1.51
Price/Sales (ttm): 0
Price/Book (mrq): 0
Enterprise Value/Revenue (ttm): 0.1
Enterprise Value/EBITDA (ttm): 1.378
CIG, Cemig
Companhia Energetica de Minas Gerais (CEMIG) is a Brazil-based company involved in the energy sector. It is mainly engaged in the generation, transmission and distribution of electric energy for industrial, residential, commercial and rural consumption. The Company is also engaged in other businesses, such as natural gas distribution in Minas Gerais through Companhia de Gas de Minas Gerais (Gasmig); telecommunications through Empresa de Infovias SA, which provides fiber-optics and coaxial cable network installed along its transmission and distribution lines; national and international consulting business through Efficientia SA, which provides energy solutions for the implementation and management of systems for electricity sector, among others.
