Buying into Brazil again

One Brazilian ETF is down nearly 14% from its January high. Its domestic small-company portfolio is appealing.

By Jim J. Jubak Feb 1, 2010 4:24PM

Jim JubakI sold Market Vectors Small-Cap Brazil ETF (BRF) out of Jubak's Picks about 9% ago back on Dec. 9, and now I think it's time to buy it again.


Well, actually I think Friday was a time to buy BRF again -- before a recommendation from Goldman Sachs to buy the Brazilian real sent the Brazilian stock market flying.


But the ETF is still down 9% from my sell and off almost 14% from its Jan. 4 high, so despite today's rally, I'm going to pull the trigger. (Readers have more flexibility than I do on buying. You should certainly consider buying half a position today and adding to it on any volatility.) 


For more on how Brazil might be diverging from China's ongoing correction, see this post.

   

At this stage in the global economic recovery, I prefer a domestic small-company portfolio like that of BRF to the export-oriented big company portfolio of iShares MSCI Brazil Index (EWZ).


BRF targets medium-sized and small companies that get at least 50% of their revenue from the domestic Brazilian market. (Average market capitalization of the fund's holdings is $1.7 billion, according to Morningstar. Average market cap at EWZ is $36.2 billion.) 


As a result, about 40% of the fund is invested in shares of consumer discretionary and consumer staples companies that sell to Brazilians (You can find more on the Market Vectors Brazil ETF on its Web page).


Right now with this buy, you get a chunk of the Brazilian economy, which is projected to grow by 5% or better in 2010, and exposure to the real, which after an 8% slide in January, looks likely to rally in 2010 as the Brazilian central bank starts to raise interest rates to head off inflation. (Yes, higher rates will slow the economy, but I think that's baked into the forecast.)


I'm adding these shares to Jubak's Picks with a target price of $54.50 by October 2010.


Jim Jubak plans to buy shares of this ETF for his personal portfolio three days after this is posted.

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
284
284 rated 2
461
461 rated 3
671
671 rated 4
628
628 rated 5
618
618 rated 6
615
615 rated 7
495
495 rated 8
347
347 rated 9
115
115 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
DYNDYNEGY Inc10
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.