China, India and Brazil are all economies with a growing middle-class on the rise. A rising middle-class in America was accompanied by a rapidly rising 20 year market from the 1950's to 1970. Just something to consider. I'm not totally comfortable with investing in emerging markets. But my eyes can not deny the trend in growth and in stock prices.
Consider Brazil. Brazilian stocks have been among the top of the emerging market list, with the South American juggernaut being fueled by a pro-growth government, booming exports and the modernization of its infrastructure.
Pro-Growth Government
Brazilian President Luiz Inácio Lula da Silva, otherwise known as "Lula", has led the country's pro-growth strategy, appointing the market oriented economist and former CEO of Bank Boston Henrique Meirelles as head of the Brazilian Central Bank. Lula and his administration quickly strengthened the country's relationship with the IMF by renewing agreements and paying off its debt early.
Next up was the Growth Acceleration Program, an initiative designed to free the country's economy from growth constraints. By 2008 Brazil had became a creditor nation, with its debt recently getting the nod from Standard & Poors as investment grade.
Booming Exports
Much of Brazil's incredible growth trajectory is being driven by its strong export business as a commodities powerhouse. Here is a big surprise to me. Brazil is the world's leading beef and soybeans exporter, and ranks high in a number of other agricultural categories like chicken, orange juice and coffee. With the exception of coffee these are all areas where I was use to the USA being the agricultural export powerhouse. Brazil's service industry is also on the rise, with new exchanges and financial services companies helping to create a more balanced economy.
Infrastructure
An infrastructure story will be a recurring theme associated with emerging markets, but infrastructure development is literally and figuratively the road that leads a country to prosperity. In 2007, Brazil launched a four-year plan to spend $300 billion to modernize its roads, power plants and ports. The development of modern infrastructure and middle-class amenities has helped Brazil establish credibility as a progressive nation and future economic leader.
Now comes the important part, how to capitalize. One way would be to move to Brazil and invest in a textile plant or soybean farm. That actually sounds like a lot of fun, but might not be realistic for most of us. Here is an easier way; buy Brazilian stocks.
There are plenty of great Brazilian stocks that trade as ADRs on American exchanges, providing a nice dose of transparency and regulation to a less familiar investment destination. Here are four Brazilian stocks to watch. Interesting to note that while the USA stock market stands near it's 1999 high our market has been used to raise trillions for foreign stocks.
Basico do Estado (SBS - Analyst Report) provides sanitation and environmental services in Sao Paul, the most populous Brazilian city. As a utility, this is one of the more conservative Brazilian stocks, but that helps create a more balanced approach to the market. The Zacks #2 rank stock looks like a great value pick, trading at just 6.5X projected current-year earnings.
Petrobras (PBR - Analyst Report) is a oil stock many may be familiar with as one of the more popular Brazilian stocks. This integrated energy company will be involved in some of the largest oil projects in the world in coming years as it works to tap into the deap-sea discoveries off the coast of Brazil. The next-year estimate looks solid at $3.57, a 22% growth projection.
Gafisa SA (GFA - Analyst Report) is a Brazilian real-estate developer. The company just reported amazing third-quarter results, with its revenue more than doubling from last year. Analysts are looking for next-year earnings of $2.79 per share, a bullish 72% growth projection. Based on the current-year estimate, GFA has a forward P/E multiple of 20X, a reasonable valuation for a company growing this quickly in the strong Brazilian economy.
No comments:
Post a Comment