The fall in commodity prices (albeit with some high sessions) in the last two weeks led to a drop in shares of companies that sell grain, as well as mining and oil companies in the period.
However, Bradesco BBI pointed out three stocks that have benefited in recent sessions amid lower prices. They are: the processed food producer BRF (BRFS3), the beer manufacturer Ambev (ABEV3) and the pasta and biscuit manufacturer M.Dias Branco (MDIA3), or BAM (acronym for the three roles): “they are assets that, generally, they are perceived as the ones that benefit the most from the drop in commodity prices, as this scenario suggests a reduction in input costs”, point out Leandro Fontanesi and Victor Romano in a report.
BBI analysts pointed out that, until Friday, these stocks had outperformed the Ibovespa by almost 10 percentage points (pp) since mid-June, when the prices of the main commodities began to fall.
Assets outperformed agricultural producers such as SLC (SLCE3), which sells cotton and grains, and São Martinho (SMTO3), which sells sugar and ethanol, both by 20 pp on average, while BAM also outperformed beef listed in 8 pp.
Check out the stock’s performance since mid-June:
The bank points out that, from mid-June to Friday, the price of cotton fell by 28%, palm oil fell by 16%, wheat fell by 12%. Oil, in turn, fell 6%, while soybeans fell 5%, corn fell 3% and aluminum fell 2%.
Fontanesi and Romano pointed out that, despite climate and geopolitical risks, they remain pessimistic about agricultural commodity prices and optimistic about BAM, as the factors that are weighing on prices are likely to continue.
There are three points: (i) increase in interest rates in the United States, with at least seven increases expected for 2022; (ii) disappointing demand from China, with margins in the struggling hog industry suggesting that grain prices need to drop by as much as 25% for margins to return to breakeven; and (iii) the bank’s oil and gas team predicting lower oil prices at US$95 a barrel for 2022 and US$90 in 2023, against spot prices around US$113 (for Brent, according to with Friday closing), which is historically bearish for agricultural commodity prices.
BBI has an outperform recommendation (a performance above the market average, equivalent to a purchase) for the shares of BRF, Ambev and M. Dias Branco, with respective target prices of R$ 27 (potential for appreciation of 85.7% against Friday closing), BRL 21 (53.6% upside) and BRL 40 (54.6% upside).
For SLC, the recommendation is for underperform (performance below the market average, equivalent to neutral) selling with a target price of BRL 35 (or a 22% drop); for São Martinho, the recommendation is marketperform (performance in line with the market average, or neutral), with a target price of R$ 38 (or decrease of 3.9%).
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