Brazil Small Stocks: Large Economy, But No Small Stocks in Brazil

  October 1, 2011  
XIII, Issue 89

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Brazil Small Stocks: Large Economy, But No Small Stocks

Did you know Brazil is the 6th largest country in the world, and has the 7th largest economy? In fact, in Q1 of 2011, Brazil had record lows in unemployment and higher wages than ever in the country’s history.

In Q1 of ’11 the Brazilian economy delivered 4.2% GDP growth. Q2 was 3.1%, up .8% over the previous year. Any way you look at it, growth in Brazil is far more robust than in the US which could be sliding into recession. Since their economy is very resource driven, it has slowed a bit with oil prices coming down, but it is still far more robust than the US economy.

In a recent survey of International private equity fund managers, 70% of those managers stated Brazil was one of the five top destinations for the investment of capital.

Brazil’s largest company- Petrobras, claims there are 13 billion barrells of oil and gas trapped in the South Atlantic.

Brazil is also hosting the upcoming World Cup and Summer Olympic Games.

There’s one other interesting factoid about Brazil I’ll bet you didn’t know. There are only about 100 public companies on the Brazilian stock exchange, and one company, Petroleo Brasiliero (NYSE: PBR) generates 50% of the volume on the entire exchange.

Despite all this growth, believe it or not, there are very few Brazilian small cap stocks for investors to choose from. Gafisa SA (NYSE: GFA) and GOL Linas Aereas Intligentes (NYSE: GOL) are the only two I can find.

Over the past 10 years about 600 small and microcap China based companies have found their way to the US markets, but very few from Brazil. Brazilian small cap stocks are a rare breed indeed.

I’m keeping a careful eye out for the inevitable influx of Brazilian small cap stock to the US Markets. It will be the next wave akin to China, and early stage investors could make absolute killings by identifying the right idea.

I have found the right idea. There is one other Brazilian small cap no one knows about. The company is now delivering about $120 million in annual revenues in US dollars, and trading at less than a $20 million market value for one reason only- no one knows about it.

I’ll provide more information in the usual Sunday release, so get ready to do a little reading along with your Sunday paper before the NFL games start this week.

Oh, and BTW- the stock market continues to be quite shaky, so stick with your SSLs on any of the past ideas. We have to live to trade again.

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