The Best Stock in Brazil

If you think the dollar is doomed, you aren't the only one.

My fellow Fool Tim Hanson, co-advisor for Motley Fool Global Gains, has warned of the dollar's demise for months now. So has Warren Buffett. Fortunately, neither of these guys has abandoned all hope. Even if the greenback gets a nasty case of gangrene, you still have ways to survive -- and even profit.

Your best bet may be to invest in the stocks of foreign companies that denominate revenue and earnings in stable currencies. Brazil's real is popular both with Tim and Global Gains co-advisor Nate Parmelee, and for good reason. South America's biggest country has a history of harvesting big winners that trade on American exchanges. Here's a look at the top five returners on Brazil's BOVESPA over the past year, and their corresponding returns here in the U.S.:

Company

Recent Price

CAPS Stars (out of 5)

1-Year
U.S. Return

Companhia Siderurgica Nacional (NYSE: SID  )

$31.74

*****

126.4%

Companhia Brasileira de Distribuicao (NYSE: CBD  )

$59.56

****

120.3%

Ultrapar Holdings (NYSE: UGP  )

$41.32

****

107.7%

AmBev (NYSE: ABV  )

$89.33

****

96.1%

Brazilian Telecommunications

$16.89

*

53.8%

Sources: Motley Fool CAPS, Yahoo! Finance.
Data current as of Oct. 7.

Why your portfolio should like Brazil
Brazil was already one of the world's fastest-moving emerging markets before Friday. But on that day, the International Olympic Committee named Rio de Janeiro as the site of the 2016 Summer Olympic Games. Goodbye, Beijing; hello, Rio.

Interestingly, China and Brazil share far more than Olympic ties. The Sino superpower has been investing in the region's natural resources to insure its own energy future. For example, earlier this year, the Chinese loaned $10 billion in fresh capital to Brazil's top oil producer, Petrobras (NYSE: PBR  ) , to help with deep-sea exploration.

Our 140,000-plus Motley Fool CAPS community also sees opportunity beyond Rio's sparkling beaches. Fools give four of five stars to the average Brazilian stock in CAPS, which tracks 33 issues trading on American exchanges. Usinas Siderurgicas de Minas G (OTC BB: USNZY.PK) is their top overall pick. The details:

Metric

Usinas Siderurgicas de Minas

Business description

Steel mill operator specializing in flat-rolled steel production.

CAPS stars (out of 5)

*****

Total ratings

61

Percent bulls

98.4%

Percent bears

1.6%

Bullish pitches

5 out of 5

CAPS members bullish on USNZY.PK also bullish on

Petrobras
Gerdau (NYSE: GGB  )

Data current as of Oct. 7.

The trends seem to favor Usinas. According to researcher BNamericas, Brazil's exports of flat-rolled steel products rose by 78.9% year over year in September to $234 million. India, Argentina, and Taiwan were the main importers.

But is Usinas a bargain at 17 times normalized earnings? When I asked Tim, he said:

Latin America is the region that has survived this global economic crisis best of all, and that's largely due to the continent's massive natural resource reserves (think oil, metals, food, and more). Now, with commodity prices rebounding sharply, the continent and Brazil, its largest economy, especially, stand to do even better. It's not immediately clear to me what the CAPS folks see in Usinas, but if you think Brazil will accompany economic growth with infrastructure build-out, this looks like a reasonable play.

Do you agree? Would you buy Usinas Siderurgicas de Minas at today's prices? Let us know by signing up for CAPS today. It's 100% free to participate.

More globe-trotting Foolishness:

Each month, Tim and Nate spotlight promising international stocks in Global Gains. Try this market-beating service risk-free for 30 days and get access to all of their recommendations and special reports.

Petrobras is an Income Investor pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy was small and cuddly. Once.


Read/Post Comments (2) | Recommend This Article (15)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 09, 2009, at 2:30 PM, stanton17 wrote:

    You can also add Vivo (VIV), the biggest cellular operator (with more than 45 million cellular subscribers), to the list of Brazilian telecommunications companies that stand to handsomely profit from the Olympics.

    Note that Vivo (VIV) also leads its rivals in market share of subscribers and market share of revenue. All this in the Brazilian telecom industry which is still in a sustained growth phase.

    Suddenly, within the last week or so, we've learned that all that growth will also be fueled by the 2016 Summer Games. That's six solid years of infrastructure expansion and repairs and you can bet telecommunications will be at the forefront of this massive effort.

  • Report this Comment On October 09, 2009, at 3:38 PM, stanton17 wrote:

    As a side note to my previous response, it should also be mentioned that the 2014 FIFA World Cup will be hosted in Brazil. See:

    http://www.fifa.com/worldcup/brazil2014/news/newsid=1065370....

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