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Petrobras, Brazilian Stocks Recovering From Truckers' Strike

Aug. 07, 2018 10:24 AM ETPBR, VALE, ERJ, EBR9 Comments
Shannon Bruce profile picture
Shannon Bruce


  • Petrobras, the centerpiece of "Lava Jato" and the company most exposed to Brazilian political interference, announced US$4.94B net profit in 1H18 (+226% YoY), its best results since 2011.
  • The stock recovered from the May 2018 truckers' strike, but investors feared political interference would return, which led to the CEO's resignation.
  • Brazil is set to hold elections on October 2018. Investor response to recent political events indicates high volatility across Brazilian securities is to be expected.
  • Investors might find unique buying opportunities at attractive valuations in Brazil's political mess, but should be aware of complexity. The ADRs of Petrobras, Vale, Eletrobras, and Embraer are exposed.

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Brazilian ADRs in the Spotlight - What the Politics Mean to Foreign Investors

Shares of Petrobras (PBR) tumbled ~40% in May 2018, falling as low as US$9.27 following the truckers' strike and closing at US$12.53 on Aug. 3, 2018. The IBOV - Brazil's index of blue-chip stocks - bottomed at 69,814 and closed at 81,435 on Aug. 3, 2018. The recovery of both of these things was driven primarily by investor sentiment on Brazil's politics and, to a lesser extent, the global commodities market.

Having recently moved to Florida following a career in corporate finance in my home country of Brazil, I have often considered writing an article on Brazilian companies - especially after having observed various misconceptions by some of my family members in the U.S. as well as various articles written by foreigners on Brazilian stocks. What ultimately led me into writing this article was realizing how dangerous Brazil's politicians can be to investors' capital - especially foreigners' capital - when I noticed that even a valuation genius such as Aswath Damodaran had a hard time figuring out how to factor Brazilian politics into his valuation. (This can be seen in one of his blog posts where he discussed how he got Vale (VALE) wrong, titled "No Mas, No Mas! The Vale Chronicles (Continued).")

First, let's briefly look at what Brazilian stocks are available to U.S. investors in the form of ADRs listed on the NYSE:






Aerospace & Defense

Gol Linhas



This article was written by

Shannon Bruce profile picture
Brazilian-Japanese-American based in South Florida. Worked in Brazil and Chile, then moved to the U.S.. I enjoy researching the stock market and love to help fellow self-employed investors here at Seeking Alpha

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I am also long Bradespar (a holding company for VALE).

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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