Many developed nations around the world are mired in debt and are likely to be lucky if they see even slow growth over the next 10 years. After suffering what some are calling a "lost decade," wherein investors have seen just about zero gains in the stock market for the past ten years, it's reasonable for people to question why they should put money at risk for huge losses when the net result has been so poor for many years.
The problem could be that economies like the United States are swimming in debt and it is too large to move the needle and see major growth for any length of time. Investors willing to look overseas, can find countries with much smaller economies which have the growth, much more reasonable debt levels and rising incomes.
Brazil offers all that, plus it is rich in natural resources like oil and metals. Brazil also has a stable government that has put in business-friendly policies. The country even recently became a net creditor nation, after years of being a debtor nation. Brazil's transformation over the past 20 years from a nation with high poverty rates to an emerging powerhouse and exporter is likely to continue in the next decade. Brazil will probably see increased interest from global investors, especially as the country takes to the world stage when it hosts the FIFA World Cup in 2014, and the Olympic Games in 2016.
Brazil is currently the eighth largest economy in the world. Many economists are expecting 5% growth from Brazil for the foreseeable future, it makes sense for most investors to consider some exposure to this dynamic economy. Here are a few Brazilian stocks that investors could post large gains for investors in the next ten years:
Gafisa SA (GFA) is one of Brazil's largest homebuilders. The company builds both lower-end housing that offers affordability as well as luxury properties with swimming pools and other amenities. The company has faced a number of challenges in the past year, including lower than expected earnings. Investors have punished the stock, and it currently trades near the 52-week low. However, Gafisa should see strong revenue growth in the future as the middle class in Brazil opts for home ownership. Buying on dips below $4.75 will probably pay off for long-term investors.
Here are some key points for GFA:
- Current share price: $5.01
- The 52 week range is $4.30 to $14.77
- Earnings estimates for 2011: 46 cents per share
- Earnings estimates for 2012: 83 cents per share
- Annual dividend: 23 cents per share which yields 4.9%
Braskem S.A. (BAK) is a leading maker of specialty chemicals and plastics such as olefins, polymers, propylene, isoprene, fuels and others. Chemical stocks like Braskem have been hard hit by concerns that the global economy is sliding back into recession due to European debt issues. If demand for chemical products stabilize, then this stock has probably seen the lows, and will remain supported by the very strong dividend yield. This is a higher risk investment due to the economic concerns, so I would only consider a small position for now and average in over time.
Here are some key points for BAK:
- Current share price: $14.56
- The 52 week range is $13.75 to $32.30
- Earnings estimates for 2011: 57 cents per share
- Earnings estimates for 2012: 93 cents per share
- Annual dividend: $1.03 per share which yields 7.3%
Tele Norte Leste Participacoes S.A. (TNE) is a leading provider of telecommunication services in Brazil. It offers mobile phone service, fixed-lines, Internet services and more. This company is poised to benefit from Brazil's rising population and higher incomes. As more consumers rise from poverty, they will want small luxuries like mobile phone services. The dividend is easily covered by earnings, and that means a dividend increase is possible. This looks like a solid buy for long-term investors.
Here are some key points for TNE:
- Current share price: $9.77
- The 52 week range is $8.49 to $19.22
- Earnings estimates for 2011: $1.11 per share
- Earnings estimates for 2012: $1.82 per share
- Annual dividend: 50 cents per share which yields 5.1%
Banco Bradesco S.A. (BBD) is one of Brazil's largest banks, and offers financial products and services to both consumers and businesses. The banking sector is much healthier in Brazil compared to other countries, and it is supported by rising exports and incomes. Banco Bradesco shares recently dropped to about $16, which appears to be a support level for the stock. Waiting for dips to about $16 or below before buying makes sense.
Here are some key points for BBD:
- Current share price: $17.68
- The 52 week range is $13.98 to $21.34
- Earnings estimates for 2011: $1.67 per share
- Earnings estimates for 2012: $1.79 per share
- Annual dividend: 11 cents per share which yields .6%
Petroleo Brasileiro (PBR) is major oil and natural gas company, based in Brazil. In recent years, a number of massive new oil finds have been discovered in Brazil. There are still plenty of opportunities for new discoveries off the coast of Brazil and other South American countries for this company to make. With so many central bankers printing money, hard assets like oil should continue to rise over time. That's why owning the top oil stock in a fast-growing and asset rich country like Brazil makes sense. The stock is trading just above the book value which is $27.01. Buying on dips is likely to pay off in the long run.
Here are some key points for PBR:
- Current share price: $27.59
- The 52 week range is $20.76 to $42.75
- Earnings estimates for 2011: not available on Yahoo Finance
- Earnings estimates for 2012: not available on Yahoo Finance
- Annual dividend: 16 cents per share which yields .6%
VALE, S.A. (VALE) is based in Brazil and produces iron ore, steel, fertilizer and other basic materials. This stock has been under tremendous pressure due to concerns that the global economy would soften and that China could be headed for a hard landing. Since China is a major buyer of iron ore, this stock can rise or fall based on economic news from Asia. In the long run, any reduction in demand is likely to be only temporary, so buying this stock while it's cheap makes sense.
Here are some key points for VALE:
- Current share price: $23.22
- The 52 week range is $20.46 to $37.25
- Earnings estimates for 2011: $4.52 per share
- Earnings estimates for 2012: $4.03 per share
- Annual dividend: 6 cents per share which yields .3%
Data is sourced from Yahoo Finance.
Disclaimer: No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is forinformational purposes only. You should always consult a financial advisor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.