There are no two ways about it, the elimination of the Brazilian team from the World Cup was a tragedy for the Latin American giant. Luckily though, four years from now, not only will Robinho, Kaka, and the rest of the Brazilian national team have another shot at the World Cup title, but Brazil will be the host of the global tournament.
Of course even if you have no idea what a soccer pitch or stoppage time is, the investor in you should take note of Brazil's coming hoopla. Why? Because according to Ernst & Young, the event could have an $80 billion impact on Brazil. And investors could score some goals of their own by finding the companies that will be on the receiving end of that economic boost.
Follow the money
According to the E&Y report, there will be $12.7 billion spent directly by Brazil to improve infrastructure for the World Cup. But that's only the beginning of the boost. The even larger impact will be the spending on goods and services that the tournament brings to the country. E&Y sees the bulk of these indirect flows going to areas such as real estate (think rentals), retail, financial services, electricity and gas, sanitation, and transportation.
We can't forget that this increase in business will mean more money going into the pockets of Brazilian workers; roughly $35 billion more, according to E&Y. That's money Brazilian consumers can use on everything from household essentials to big-ticket items like cars.
Taking your shot
Really digging in and checking out the smaller Brazilian companies that aren't listed on the U.S. exchanges could prove very profitable for investors willing to invest the extra time. However, for those who want to keep it simpler, there are some larger, U.S.-listed Brazilian companies that may benefit from the 2014 World Cup. Here are five:
|
Company
|
Headquarters
|
Market Cap
|
Industry
|
|
Vale (NYSE: VALE )
|
Rio de Janeiro
|
$130 billion
|
Metals and mining
|
|
Companhia de Bebidas Das Americas (AMBEV) (NYSE: ABV )
|
Sao Paulo
|
$55 billion
|
Beverages
|
|
Banco Bradesco (NYSE: BBD )
|
Osasco
|
$51 billion
|
Banking
|
|
CPFL Energia
|
Sao Paulo
|
$11 billion
|
Electric utilities
|
|
Companhia de Saneamento Basico do Estado de Sao Paulo (NYSE: SBS )
|
Sao Paulo
|
$5 billion
|
Water utilities
|
Source: Capital IQ, a Standard & Poor's company.
Vale may be one of the most recognizable names on the list since it's one of the largest companies in the world. It is well-positioned to be the supplier of choice when it comes to providing the basic materials for the infrastructure that Brazil needs for the World Cup. The company produces iron ore, manganese, aluminum, and copper in Brazil. In addition, it operates a leading logistics network in Brazil that includes railroads, maritime terminals, and a port.
With increased spending on food and beverages, it's a virtual guarantee that a good deal of that money will find its way to AMBEV. According to the company, AMBEV is the largest brewer in Latin America and the fourth-largest beer producer in the world. Though Coca-Cola (NYSE: KO ) -- which operates in Brazil through its bottlers -- claims the leadership position in Brazil's soda market, AMBEV claims a massive 70% share of the country's beer market.
More economic activity inevitably spurs business in the banking and financial services sector, and that's where Banco Bradesco comes in. Bradesco is one of Brazil's largest banks, with roughly 14% of the country's savings deposits and a leading position in areas such as insurance and public pension plans.
Finally, with the World Cup and all of the hoopla leading up to it, there will be an increased demand for such basic utilities as electricity, water, and sanitation. CPFL and Companhia de Saneamento are two of the largest utilities in Brazil and operate in the electricity and water and sanitation fields, respectively. For fans of dividends, CPFL offers the added bonus of a fat 6.7% dividend yield.
Keep kicking the ball around
I think all five of these companies could be good ways to play not only the World Cup, but also the general economic growth in Brazil.
However, these aren't the only ways to take advantage. As I mentioned above, there are many publicly traded Brazilian companies that aren't listed on the U.S. exchanges. There are also a great number of non-Brazilian companies doing business in Brazil. Brazil is Wal-Mart's (NYSE: WMT ) second-largest international market based on store count, and nearly half of Unilever's (NYSE: UL ) total 2009 sales came from a handful of developing markets that includes Brazil. Both of these companies could see a bump from a soccer-frenzied Brazil.
Now that you've heard what I think, it's time for you to weigh in. Do you think there's a better stock than the ones listed above to cash in on the 2014 World Cup? Head down to the comments section and share your thoughts.
My fellow Fool Tim Hanson thinks the biggest investment opportunity of 2010 could be one of the other emerging markets.
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