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Why Ultrapar Is Poised to Outperform

By Brian D. Pacampara, CFA - Apr 12, 2013 at 5:01PM

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Market-trouncing returns could be written in this 4-Star.

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, Brazilian liquefied petroleum gas distributor Ultrapar Holdings (UGP 2.85%) has earned a respected four-star ranking.

With that in mind, let's take a closer look at Ultrapar, and see what CAPS investors are saying about the stock right now.

Ultrapar facts

  

Headquarters (founded)

Sao Paulo, Brazil (1937)

Market Cap

$14.0 billion

Industry

Oil and gas storage and transportation

Trailing-12-Month Revenue

$27.4 billion

Management

CEO Thilo Mannhardt

CFO Andre Covre

Return on Equity (average, past 3 years)

16.3%

Cash/Debt

$1.5 billion / $3.2 billion

Dividend Yield

2.7%

Competitors

Dow Chemical

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 98% of the 1,834 members who have rated Ultrapar believe the stock will outperform the S&P 500 going forward.

Just yesterday, one of those Fools, djohn1969, succinctly summed up the Ultrapar bull case for our community:

[T]he company's products and services are so integral to the day-to-day lives of Brazilian citizens and the Brazilian government is focused on lifting Brazilian citizens out of extreme poverty and protecting them from pains such as inflation. In other words, the same nationalist issues that hurt [Petrobras, Vale, etc. seem to be actually helping UGP. ... Unlike VALE, Ultrapar is not dependent on China or the wild swings in sentiment regarding China. Unlike PBR (and Vale to a lesser degree), Ultrapar is not a victim of Brazil's political power brokering and corruption. And, unlike the Brazil utilities that had until recently been widely considered the "safe" Brazil plays, Ultrapar is not the target of the drastic mid-game regulatory rule changes that have hammered the Brazil utilities.

With that said, the stock has had quite a run so I probably wouldn't open a new position until after the next earnings release (I already have my full position). I also recommend a significant amount of due diligence to understand what the company does, where it operates (not just Brazil), etc. prior to buying since it is typically harder to understand and keep up with foreign companies.

Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.

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Stocks Mentioned

Ultrapar Participações S.A. Stock Quote
Ultrapar Participações S.A.
UGP
$2.89 (2.85%) $0.08

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