Brazilian stock market is the lowest of the year, warns Análise de Ações

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Brazilian stock market is the lowest of the year, warns Análise de Ações

July 05
01:14 2022
Profitable companies like Petrobras (PETR), Banco do Brasil (BBAS3), Vale (VALE3), Itaú (ITUB) are very cheap, according to Análise de Ações.

Known as an amazing place to visit, Brazil also offers great investment opportunities these days. Despite the political instability and the covid-19 pandemic, Brazil has some very strong sectors in its economy that are not only capable of generating large profits, but also concentrate some of the most profitable companies in the world.

Looking at companies listed on the Brazilian stock exchange, known as B3, there are many investment opportunities in various sectors.

The Brazilian stock market is below 100 thousand points, returning to the price of 2019, with the exception of the drop caused by the corona virus at the beginning of the pandemic in 2020. In addition, privatizations are starting to get off the ground.

“The Brazilian government has just privatized Eletrobras, Brazil’s main electricity generator and transmitter, and further privatizations are on the way, attracting foreign capital and developing the sector,” said equity analysts at Análise de Ações.

While the government strives to privatize state-owned companies, there is no lack of options for good investments on the Brazilian stock exchange.

Looking at the P/E ratio, the P/E of the main Brazilian capital market index, the Ibovespa, is at one of the lowest levels in history. The Ibovespa index P/E is trading at 6.8x, a 40% discount on the historical average of the last 15 years at 11.3x.

Brazilian banks, for example, are among the most profitable financial institutions in the world. They often have a good return on equity (ROE).

Itaú (ITUB), the largest Brazilian bank, which has a P/E of only 7, something seen only in 2015, during the period of greatest instability in the last 30 years in the country.

Petrobras (PETR), the oil company, has a P/E of 2.5, even with record profit.

Another very cheap company is Taesa (TAEE), one of the largest electricity transmission companies in Brazil, the company builds, operates and maintains transmission lines in Brazil and neighboring countries.

Brazil is not only cheap relative to its own track record, but also when compared to other global markets. Today, the Ibovespa P/E trades at a discount of 61% in relation to the same indicator of the S&P 500 (the main American stock exchange), a much greater discount than the historical average of around 30%.

But every prize is accompanied by a risk. As an emerging country, Brazil is at greater risk than developed countries, such as the United States. Brazil is also one of the best countries in the world to invest in fixed income. This happens because Brazil is one of the biggest payers of real interest, the interest rate when discounting inflation.

Far from its historic high of 130,000 points, but also far from the 67,000 points seen in the fall at the beginning of the pandemic. The Ibovespa is ready to take off again.

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Company Name: Análise de Ações
Contact Person: Marcílio Lima
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Country: Brazil