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  • Seeking Contrarian Value In Brazil: Itau Unibanco Shows Potential Despite Rising Risk In Brazil [View article]
    GG_322 thank you for the additional comments, I agree BCH is a solid bak and I am in the process of writing an up to date analysis on it. While I certainly agree with your points I believe that this is creating opportunities for investors in Brazil at this time if they pick their investments carefully. But overall Chile is the better bet for those investors seeking a safe haven in Latam.
    Nov 5, 2012. 05:46 PM | Likes Like |Link to Comment
  • Seeking Contrarian Value In Brazil: Itau Unibanco Shows Potential Despite Rising Risk In Brazil [View article]
    OldWarrior thank you for the comments. It is the current issues being experienced in Brazil which have triggered considerable negative investors sentiment that I believe have created opportunities for value investors.

    However, you are quite right in pointing out that Chile is a superior option. Peru I believe has a similar level of risk to Brazil for investors at this time, plus the choice of investments is far narrower and primarily restricted to resource companies. The average monthly wage adjusted for purchasing power parity for Brazil is around $709 compared to the U.S at $3200, Argentina at $1,100 and Chile at $1,000. Generally middle class refers to a social, economic and demographic status, which is proportional to the cost of living, ability to access education and the surplus capital left to consume and invest.

    In the case of Latin American countries the cost of living is substantially lower than developed countries such as the U.S or U.K and consequently those demographic groups identified as middle-class will have a lower median income than a developed country but enjoy a similar lifestyle. With regard to Brazil there has been a substantial growth in the middle-class particularly because of the rapid economic growth seen over the last decade combined with the government's social equity programs.

    This has led to a greater domestic consumption, but it certainly has not placed Brazil in the position where it is able to shift from being an export driven economy to one of domestic consumption. Then again all of the Latin American economies are export driven.
    Nov 5, 2012. 01:59 AM | Likes Like |Link to Comment
  • Seeking Contrarian Value In Brazil: Itau Unibanco Shows Potential Despite Rising Risk In Brazil [View article]
    tasilva certainly no inconvenience and the alternate view you have provided is appreciated.
    Nov 4, 2012. 08:06 PM | Likes Like |Link to Comment
  • Seeking Contrarian Value In Brazil: Itau Unibanco Shows Potential Despite Rising Risk In Brazil [View article]
    Dr George sounds like the holiday from hell! I have never had any experiences that come even close to that in Latin America. PBR is a difficult company to own as is Vale. This comes from the Brazilian government taking the view that resources are a strategic asset that should benefit all Brazilians and not just the private sector. That is a compelling argument in a sense, but the problem is it has meant in reality the government is seeking to milk as much revenue directly and indirectly from both companies.

    Furthermore, as PBR is a public/private company it is significantly exposed to the whims of the Brazilian government as I pointed out in this article I wrote earlier this year http://seekingalpha.co... .

    I believe that banks and retail are far better investment choices in Brazil, but a strict value seeking stock picking approach has to be taken. In these sectors along with the utilities sector I believe there are some very good bargains to be found.
    Nov 4, 2012. 02:47 PM | Likes Like |Link to Comment
  • Seeking Contrarian Value In Brazil: Itau Unibanco Shows Potential Despite Rising Risk In Brazil [View article]
    Jarco thank you for the feedback. I guess I could best be described as a Brazil bear. but I still do see opportunities in the country because of the significant sell down in Brazilian stocks since the economy tanked and the Rousseff government has embarked on a particularly heavy handed protectionist and interventionist agenda. I am not a big fan of ETFs, particularly broad based ETFs like EWZ, but it is down by 34% from an intra day high of just over $81 in Oct 2010.

    Although they are a useful investment tool for accessing markets which don't have a wide range of companies listed on a US exchange such as GXG for Colombia or EPU for Peru. I think the secret to investing in Brazil as the moment is to hunt for bargains in unloved sectors or those that have been heavily hit the policies of the Rousseff government.

    I am also taking a long-term perspective which includes a view that the level of political risk will fall when the government changes. I am expecting to see a more pragmatic approach to economic management in the vein of Lula rather than the current populist and increasingly socialist policies of the Rousseff government. However, the next presidential election isn't until 2014 and I can't a fix on how popular Rousseff is but I have heard reports of increasing social unrest and some backlash against her policies.

    But Brazil at the moment is a high risk investment location and my preferred strategy would be to build a core portfolio of U.S blue chips and then take a satellite approach stock picking complimentary and under valued stocks from emerging markets to enhance returns and add geographic diversification. I certainly wouldn't condone investing an entire portfolio in emerging markets at this time.
    Nov 4, 2012. 02:35 PM | Likes Like |Link to Comment
  • Seeking Contrarian Value In Brazil: Itau Unibanco Shows Potential Despite Rising Risk In Brazil [View article]
    Hi swphill I plan to take a closer look at consumer good stocks in Brazil as part of this series, this will include BRF and CBD. I would also recommend this article by Labutes IR http://seekingalpha.co... is an analysis of the French food retailer Casino the owner of CBD and also Exito the largest department/grocery store chain in Colombia. I am also pulling together an analysis of Brazilian utilities companies particularly in light of recent government changes in pricing policies that have seen them fall significantly in value. If there is anything else your looking for please let me know.
    Nov 4, 2012. 02:03 PM | Likes Like |Link to Comment
  • Seeking Contrarian Value In Brazil: Does Banco Bradesco Represent Value? [View article]
    Kekkonen I have been looking at Bladex for sometime and I am planning on writing an article about it but I am still trying to get a solid feel for the bank. It is a very different creature from your standard commercial bank and carries very different risks and return opportunities for investors. This is predominantly because it is a government sponsored trade finance bank and not a commercial bank or even an investment bank. Also investing in such an institution does not give you true exposure to banking and finance in Latam.
    Nov 4, 2012. 04:18 AM | Likes Like |Link to Comment
  • Seeking Contrarian Value In Brazil: Itau Unibanco Shows Potential Despite Rising Risk In Brazil [View article]
    Hi Col

    Thank you for the feedback. With regard to retail investors it really comes down to the reasons for making the investment and their personal circumstances. Normally I would see any equity investment as a long-term 5 year plus investment and given the economic and political risks in Brazil at this time I would see any investment in ITUB as being a long-term investment. Overall the potential upside for investors is higher than it was for BBD, but BBD is a better managed institution, so investors also need to be aware of the investment risks as well.

    Obviously if there is a shorter time frame for investing, then the risk is greater but there are means of off-setting that risk through other trading strategies, but investors would need to be cognizant of the fact that many of these foreign ADRs do not have the same degree of liquidity on U.S exchanges because trading volumes are far thinner than domestic equities.

    While I haven't given a time frame on the indicative fair value I normally calculate that on today's data and that is represents the bank's fair value as of the present, but it is directed towards the long-term investor.

    Thanks,

    CV
    Nov 3, 2012. 09:25 PM | Likes Like |Link to Comment
  • Seeking Contrarian Value In Brazil: Does Banco Bradesco Represent Value? [View article]
    Thank you Jack, you'll have to excuse my slightly odd sense of humor, it comes from looking at numbers and writing formulas in spreadsheets for too long. I agree Chile has certainly had its ups and downs and problems politically, economically and socially. But it has stabilised and then developed very impressively over the last two decades. I also believe that it is could serve as a good model for other Latam countries to follow as they seek to further develop.
    Nov 2, 2012. 12:26 AM | Likes Like |Link to Comment
  • Does Austerity Work? [View article]
    Freddy I would certainly agree that the Euro is not going anywhere and in the greater scheme of things the current crisis will only force the EU to take the measures and implement the policies that should have been in place at the time of the currency union. This should see the EU become far stronger and hopefully act as a bulwark against further crises.

    Hopefully this will include taking steps to move the EU toward a fiscal union and broad based assistance for the periphery countries to rebuild their economies using stimulus rather than forced austerity measures. Overall through using the case of Portugal Labutes has highlighted many of the issues relating to the use of austerity as a means of repairing an over leveraged economy in crisis. Lets hope the IMF and other international financial organizations learn from this and develop a far better system for dealing with financial crises.
    Nov 1, 2012. 06:37 PM | Likes Like |Link to Comment
  • Does Austerity Work? [View article]
    Default still doesn't eliminate the debt for the sovereign as bankruptcy does for other legal entities within a sovereign legal system. Essentially a sovereign can not declare bankruptcy and have its debts legally extinguished, it needs to have the full agreement of all creditors that they won't pursuse the debt, Argentina in this context is a very useful example.
    Nov 1, 2012. 06:25 PM | Likes Like |Link to Comment
  • Seeking Contrarian Value In Brazil: Does Banco Bradesco Represent Value? [View article]
    Jack some very good points, I am wodering whether you have hacked into my PC and been looking through my upcoming articles?
    Chile is on the agenda and it is one of my preferred investment locations in Latam for a variety of reasons including the strong economic growth. The other main reason being that it is quite stable politically, has low political risk and in the 2011 Corruption Perception Index was rated at 22nd which placed it lower than the US as 24th. I completed an article on Banco Santander Chile at the end of August http://seekingalpha.co... and I am currently working on Banco de Chile and Corpbanca.
    Nov 1, 2012. 06:20 PM | Likes Like |Link to Comment
  • Does Austerity Work? [View article]
    Interestingly those 'fiscally responsible' nations private financial sectors were happy to lend considerable sums of money those so called less fiscally responsible nations on the periphery, even when it was clear to the lenders that those countries were incapable of repaying the loans. Perhaps a different standards of credit risk analysis is applied to sovereigns that are part of the E.U.? Or the bankers thought we can squeeze a higher return that is 'safe as houses' because it is a sovereign that will always pay and if they don't our government with the assistance of the ECB and the IMF will be able to apply considerable pressure to force them to repay those loans.
    Oct 31, 2012. 07:28 PM | Likes Like |Link to Comment
  • A Valuation Model For Those On A Tight Schedule [View article]
    Paulo thank you for the article and sharing the valuation model, very impressive. I think the most important thing is that it is simple and easily applied and fits well into any investors toolbox and can be used in a complimentary manner with other methodologies. I am not a big fan of DCF not only because of the variable and complexity of the model but also because it doesn't work particularly well on a variety of companies such as banks, miners and E&P oil and gas.
    Oct 31, 2012. 01:34 AM | Likes Like |Link to Comment
  • Seeking Contrarian Value In Brazil: Does Banco Bradesco Represent Value? [View article]
    Hi Dr George

    Thank you for the information, I am surprised that you couldn't find BBD it is covered by a range of broking houses and is one of the few Brazilian stocks still rated by the majority as a buy. Hopefully this link can help you out http://bit.ly/SgApxM .

    I agree with the probability you have given for selecting an outperforming stock and it is even harder in emerging markets such as Brazil with the BRICS having tanked and the overall global economy in the doldrums. This is part of the reason for looking at economies and sectors that have fallen out of favor or don't receive a high degree of coverage. Overall BBD is a good well managed bank I just couldn't see sufficient upside for investors.
    Kind regards,
    CV
    Oct 30, 2012. 07:45 PM | Likes Like |Link to Comment
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