Ultrapar Holdings: A Brazilian Value and Growth Stock

Includes: EWZ, UGP
by: Joe Kunkle

Ultrapar Holdings (NYSE:UGP) is a Brazilian distributor on liquefied gas, lubricants, and other specialty chemicals such as crop protection chemicals and paints. The company also provides storage and shipping, owning a fleet of 580 trucks.

I came across Ultrapar after seeing that MA Industries is looking to buy Albaugh for $1B, a U.S.-based distributor of crop protection chemicals, a significant growth industry.

Ultrapar has a market cap of $6.7B and shares trade 14.7X earnings, 0.36X sales, and 28.4X cash flow with a 2.32% dividend yield. Sales growth is around 25% quarter over quarter.

Ultrapar is a relatively unknown name without any Street coverage, trading an average of 85,000 shares a day. However, shares are nearing a technical breakout of a $8 horizontal channel that would imply a move to $58, 16% higher from current prices.

Dodge and Cox owns 4.5% of outstanding shares, the largest fund holder, while 4 of the top 7 fund holders have recently added to positions.

There is not a ton of information available on this stock, but refiners and chemical names are two of the best looking industries based on recent earnings announcements and investor conference comments, so I like Ultrapar as a play on both these industries, and also exposed to the high growth Brazilian market. The refiner may see added demand as the Olympics approach as well.

Disclosure: Currently no position

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