I had to write a brief note about the panic whipped up by UBS’ downgrade of Petrobras, cutting its price target from R$47 to R$22 on fears of a policy shift under the incoming Lula administration.
Great write-up. Agree with you on PBR; the market is pricing in complete devastation. Reduce the dividend by 70% and you still have a decent yield. Even with no reversion of valuation multiple, these co's will rise as incomes soar on higher oil price over the coming year.
I'm also much more comfortable at present holding oil majors outside of woke western markets. PBR is one of my biggest holdings, followed by CNOOC - massive interests around the world and they're aware of what's coming and looking to divest out of North Sea, and only a guess but GoM likely next.
I have owned Vale for many years, but if history is a guide (operation car wash...), I think Brazilian stocks (there are many good ones) are still going to get cheaper further into a Lula Admin... Nevertheless, some funds still seem to be buying in Brazil - one even shifted some funds from Mexico (actually more stable politically and economically than people think) to Brazil in Jan: https://emergingmarketskeptic.substack.com/p/em-fund-stock-picks-commentary-february-28-2023
I don't think it's going to turn around and be all rosy overnight, but the amount they have been smacked leaves plenty of room for price recovery to still be valued awefully. ie. the common story of making money when things go from dreadful to just bad.
At the moment I'm focused on oil, but hopefully you'll be proved correct and the Brazil market gets further punished by the market. Will then have to cast my net further. Any others you like down there in particular? At a quick glance LND still looking good, but haven't reviewed recently.
There was a Brazilian rail stock, a port operator and a drug store chain mentioned by funds in either this week's or last weeks posts along with the usually Brazilian names foreign funds tend to own:
Dividend announced today. Political powers will likely mess around with pet projects and virtue signalling, but there are just so many tailwinds between increasing oil price (supercycle), massive exploration drive, legal impediments to stealing it (no parliament on side), and so much profit and cashflow they can't realistically eliminate dividend even if they try.
You nailed this article, reading it now for the first time in July 23’
Great write-up. Agree with you on PBR; the market is pricing in complete devastation. Reduce the dividend by 70% and you still have a decent yield. Even with no reversion of valuation multiple, these co's will rise as incomes soar on higher oil price over the coming year.
I'm also much more comfortable at present holding oil majors outside of woke western markets. PBR is one of my biggest holdings, followed by CNOOC - massive interests around the world and they're aware of what's coming and looking to divest out of North Sea, and only a guess but GoM likely next.
I have owned Vale for many years, but if history is a guide (operation car wash...), I think Brazilian stocks (there are many good ones) are still going to get cheaper further into a Lula Admin... Nevertheless, some funds still seem to be buying in Brazil - one even shifted some funds from Mexico (actually more stable politically and economically than people think) to Brazil in Jan: https://emergingmarketskeptic.substack.com/p/em-fund-stock-picks-commentary-february-28-2023
I don't think it's going to turn around and be all rosy overnight, but the amount they have been smacked leaves plenty of room for price recovery to still be valued awefully. ie. the common story of making money when things go from dreadful to just bad.
At the moment I'm focused on oil, but hopefully you'll be proved correct and the Brazil market gets further punished by the market. Will then have to cast my net further. Any others you like down there in particular? At a quick glance LND still looking good, but haven't reviewed recently.
I was interested in that one along with Argentina's CRESY which is invested in Brazil ag but ultimately went for US-based LAND given the dividend certainty. US soy farmers cannot compete with South American ones unless the latter has been hit by bad droughts BUT rural Brazil and big ag supports Bolsonaro and might be in the crosshairs of Lula... I do have an updated Brazil ADR list here: http://www.emergingmarketskeptic.com/emerging-market-adrs/latin-america-adrs/south-america-adrs/investing-in-brazil-adrs-brazilian-stocks/
There was a Brazilian rail stock, a port operator and a drug store chain mentioned by funds in either this week's or last weeks posts along with the usually Brazilian names foreign funds tend to own:
https://emergingmarketskeptic.substack.com/p/em-fund-stock-picks-commentary-february-28-2023
https://emergingmarketskeptic.substack.com/p/em-fund-stock-picks-commentary-february-28-2023
Dividend announced today. Political powers will likely mess around with pet projects and virtue signalling, but there are just so many tailwinds between increasing oil price (supercycle), massive exploration drive, legal impediments to stealing it (no parliament on side), and so much profit and cashflow they can't realistically eliminate dividend even if they try.