Friday, June 08, 2012

Brazil's Parsimony Economy

Brazil's policy makers recently said 'additional monetary flexibility should be conducted with parsimony.' In case you aren't sure what parsimony means, according to some online dictionaries, parsimony is thrift, unusual or excessive frugality, and the quality of being careful with money. The Brazil economy has been slow in terms of recovery, so the country's central bank has decided to drop its benchmark interest rate in July. For the first quarter of this year, Brazil's economy grew by only 0.2%, significantly lower than what analysts predicted. The government's state development bank BNDES is increasing low interest rate loans and, even better news, taxes on consumer and industrial goods have been reduced, in order to help spur on the economy.

So how have Brazil stocks been performing? Terrible! During the last year, even though the S&P 500 was up a couple percent, the iShares MSCI Brazil Index ETF (EWZ) took a dive, tanking about 28%. If you think it's time for a rebound, there are about 25 Brazil companies that trade in the United States, according to the free Brazil stocks list at More than half of the companies have yields in excess of 3%.

Cia Energetica de Minas Gerais (CIG) is one example. It serves electric energy primarily in Minas Gerais, Brazil. The stock trades at 12 times forward earnings, and pays a decent yield of 3.6%. Earnings the latest quarter ending March 31 were up 20% on a 15.1% rise in revenues.

Here's a contrarian stock for you: Gafisa S.A. (GFA), a developer of residential buildings including luxury residences. The company trades at 15 times forward earnings. Earnings for the latest quarter were down slightly, however, revenues were up 27%. Sporadic annual dividends have been paid during the last few years.

Telefonica Brasil, S.A. (VIV), the large Brazilian telecom company, pays a substantial yield of 4.4%, and dividends have usually been paid semi-annually for over 12 years. The stock trades at nine times forward earnings. Quarterly earnings were up an incredible 128.9% on an amazing 109.2% boost in revenues.

To see other Brazil stocks, almost all of which pay dividends, go the to access the list of Brazil stocks that can be downloaded, sorted, and updated.

Disclosure: Author didn't own any of the above at the time the article was written.


1 comment:

Scott Davidson said...
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