Earlier this year, Brazilian incumbent Dhilma Rousseff won re-election as president of the country boasting Latin America's largest economy. At the time we asked, "Is It Time to Invest in Brazil?"
The thesis was simple enough. Despite a halt to the double-digit growth seen before the financial crisis, Brazil is still home to a near 100 million-person-strong middle class. It is governed by a mature democracy. It is absolutely loaded with natural resources. Taking a long-term view, the future looks quite bright for this sleeping giant.
Investing in foreign markets isn't always easy
The challenge for investors here in the U.S. is finding an appropriate vehicle for investing in the Brazil markets. In the previous post, we mentioned Petrobras, Brazil's massive, state controlled oil company, the home building company Gafisa S.A., and the largest diversified ETF, the Shares MSCI Brazil Index Fund.
These three options represent the two easiest methods to increase your exposure to the Brazilian markets in an efficient manner: You can invest directly in a company if it happens to trade on a U.S. exchange directly or as an ADR, or you can invest indirectly in a fund with exposure to the market.
Expanding on these two methods and without further ado, here are five more investment options to gain exposure to the Brazilian market and its promising future.
1. Global X Brazil Consumer ETF (NYSEMKT:BRAQ)
The past few years have been tough for Brazilian investors, and this ETF reflects that. The fund is down 11% in 2014 and down 10% since 2010. Compared with some of the other investment options over the past five years, this ETF has held up quite well, a reminder of the growing power of Brazil's middle class.
The fund's largest holding is JBS SA, the largest food processing company in the world. The fund's largest concentration is in the consumer defense sector, representing 58% of the portfolio. Consumer Cyclical companies represent 31% of holdings.
The fund's expense ratio is 0.77%.
2. Global X Brazil Financials ETF (NYSEMKT:BRAF)
Also reflecting the tough Brazilian market over the past several years, this financials concentrated ETF has declined a whopping 41% since 2010 and about 10% in 2014.
Just under 90% of the funds assets are in financial services and real estate holdings, with the largest holding being our next investment option at 11.16%.
The fund reports an expense ratio of 0.77%.
3. Itau Unibanco Holding S.A. (NYSE:ITUB)
Itau is a full-service financial institution based in Sao Paulo. The bank offers investment services, advisory, deposits, loans, and a plethora of other products for its retail and commercial customer base. The bank employs over 94,000 workers, has $443 billion in total assets, and posted a profit of $2.6 billion for the 2014 third quarter. Those profits represent a very impressive 1.75% return on assets on a trailing-12-month basis.
Itau is the second largest bank in Latin America, trailing only its Brazilian competitor Banco do Brasil's $555 billion in total assets.
4. EG Shares Brazil Infrastructure ETF (NYSEMKT:BRXX)
As with the other ETF's listed here, the past few years have been tough on this infrastructure focused fund. The fund is down about 32% in 2014 and down about 42% since 2010.
The fund skews heavily to utilities (49% of assets) and industrials (23%). Basic materials, energy, and communication companies each have a concentration above 7.5%. The fund's largest single holding is Telefonica Brasil, the telecom provider.
The fund's expense ratio is 0.85%.
5. Vale (NYSE:VALE)
Vale is Brazil's massive mining company, well positioned to take advantage of Brazil's expansive deposits of iron, nickel, copper, and coal, in addition to more precious metals. The company also has a fertilizer production business and operates hydroelectric power facilities in Brazil, Canada, and Indonesia.
On a trailing-12-month basis, the company reports negative $3 billion in profits on $42 billion in revenues, as of Sept. 30, 2014. Operating cash flow, however, was nearly $13 billion, supporting a trailing 12 month dividend yield of 6.8%.
Jay Jenkins has no position in any stocks mentioned. The Motley Fool recommends BMW and Nike and owns shares of Vale and Nike. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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