Luis Stuhlberger, manager of the Verde fund, is known for being a “would limer” reserved, who speaks little to the press about where the portfolio – which has earned more than 20,000% since it was created in 1997 – is currently investing. But once a year, he opens up the game to investors, in an event where he sets out his vision for the economy and financial assets.
This year’s meeting, accompanied by the InfoMoney, took place on the morning of this Tuesday (28), bringing together a select audience at Teatro B32, on Avenida Faria Lima. The event, commemorating the fund’s 25th anniversary, was also streamed online.
Stuhlberger’s vision for the economy – and that of his partner Luiz Parreiras, in addition to the chief economist at Verde Asset, Daniel Leichsenring – is based on some assumptions. Inflation, in his opinion, has become the main global concern, overtaking the coronavirus pandemic or the war between Russia and Ukraine. In the United States, in particular, Stuhlberger has been looking more closely at the housing market. Locally, the manager works with the hypothesis of the election of ex-president Lula in the October election – and builds positions based on the possible consequences of this result.
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“If I look where the Fed [Federal Reserve, banco central americano] was wrong, it was in imagining that inflation of goods [bens] it wouldn’t contaminate the services one,” Stuhlberger said. “But the truth is that it is contaminating, in the United States, Europe and Brazil”.
In American territory, the trend, in his view, is for this to remain for a while. Stuhlberger recalled that rent inflation has a weight of 31% in the CPI, the consumer price index in the United States, and that rent indicators calculated by private entities – such as the Zillow index – show an “expressive and appalling” rise in prices. It is a sign, according to him, that there is more inflation of “contracted” services in the country for the near future.
Taming inflation will not be simple, according to Stuhlberger, given the level of disposable income in the United States. The transfers made by the government and the generous unemployment insurance offered to those who lost their jobs turned into savings in the hands of the Americans.
The sum of the funds held in cash by the Americans (deposits and money market funds, short-term funds) currently total $6.7 trillion, according to data presented by the manager. It is more than double the amount expected if the growth trend of the last 20 years had continued from 2020 onwards. The scenario is still “extremely inflationary” and demonstrates that the Fed will have work “to get inflation in order”, according to Stuhlberger.
In Brazil, Stuhlberger’s perspective is that inflation will also be higher from now on. The containment of public expenditures after the implementation of the spending ceiling, still in the Michel Temer government, allowed to hold the rise in prices and reduce the real interest balance of the economy, according to the manager. But as, due to a series of circumstances, its establishment did not coincide with the growth of the economy, “the ceiling became the enemy of both the [presidente Jair] Bolsonaro and Lula”.
In his view, both inflation and interest rates will be higher if there is a policy of increasing public spending by the winner of the October elections. “As we believe Lula will win, we will possibly have higher inflation,” he said at the event.
First gold investment since the 1980s
In the manager’s portfolio, the expectations of Stuhlberger and his team are reflected in some specific positions. For the first time since the 1980s, the manager has built a position in gold – which already occupies about 5% of the portfolio. The metal caught his attention because, unlike financial assets in general, which have been suffering heavily from the Fed’s rate hikes, gold “has held up well.”
The bet is related to the discussion about what is the safe haven for the money at the moment. Historically, the dollar and US government bonds have filled this role. However, sanctions applied by the US government to the Russians after the invasion of Ukraine in February, prevented movements and put the US currency’s role as an international reserve in check.
Temporarily, Stuhlberger said, the debate was overshadowed by concerns about inflation — but sooner than later (sooner than later) will come back to the fore. In this context, the position in gold, in his view, makes sense. A catalyst for prices, according to the manager, would be the purchase of a large amount of the metal in the markets by a country and the physical displacement of the bars within its territory.
Verde also maintains a position of around 1% in oil. “It’s a simple story: lack of supply,” Parreiras said during the event. With investments dwindling in exploration and refining of the raw material, there is no chance of having more oil available in the short term – and in the meantime, prices are expected to remain high.
Green also has a position of around 4% in global stocks.
Locally, Verde Asset has a stake in the stock market – but selectively. “The stock market is very cheap. It doesn’t mean that I can’t stay longer, but when you look at the history of PL [múltiplo de preço por lucro]it is at the lowest level since 2002, of six times”, said Parreiras.
The position in domestic stocks is equivalent to 18% of the fund – but it is a restricted portfolio, made up of just five companies, which has deserved most of the manager’s attention. “We are trying to allocate capital to a series of companies that are big winners almost regardless of any scenario in Brazil”, said the manager.
An example, according to Parreiras, is the energy company Equatorial (EQTL3), which has been in the portfolio since 2010 – a period in which the size of the business was multiplied by 17. The company’s differential, in the manager’s view, is in the quality of management and the company’s “exceptional” history of capital allocation. Equatorial’s two most recent bets – renewable energy and sanitation – are welcomed.
Another company in Verde’s portfolio is Suzano (SUZB3), as it is considered one of the most competitive in the pulp segment, with lower costs and greater opportunities in the green economy – in addition to being historically cheap. Its multiples, according to Parreiras, reflect a pulp price at half the current prices.
Localiza (RENT3) and Unidas (LCAM3), in the process of merging, are also in the portfolio. “One has the DNA of car rental, the other that of fleet management. They will be the best player in the market, consolidating the sector”, said the manager. Assaí also stands out, since the cash and carry segment is relatively protected from macroeconomic developments, according to Parreiras.
Another action in the portfolio is Hapvida (HAPV3), which, after the merger with Intermédica, should become the most important company in the vertical healthcare segment in the country, according to Parreiras. At the moment, given the rise in costs for the company, margins are compressed – but this is a conjunctural situation, in the manager’s view. Traditionally, health plans tend to be adjusted above inflation.
On the other hand, Stuhlberger highlighted that the fund carries out some hedge (protection). Among them is a long implied inflation, considering the base scenario that prices continue to rise in the near future.
Verde has also expanded its exposure to credit, both domestic and international – but the highlight is in the local market, and high yield, with relatively higher risk, given the expectation of a higher return. Usually, the credit position occupied 1% of the portfolio. Recently, it was expanded to the range of 8% given the returns found in the market, in the range of CDI plus 5% to 6% per year.
Some of the top positions offer even greater returns. A perpetual debenture of Vale, for example, provides that part of the revenues obtained in a group of mines of the company will be distributed to the debenture holders. The final return, according to Parreiras, is around 8.5% per year plus the variation of the dollar.
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