The Brazilian stock market has been recovering after a first half of general low. Even so, the country’s Stock Exchange still has severely undervalued securities, but with growth potential.
at the request of Sheetthree experts listed actions that were overturned by the turmoil generated by external crises, such as the soaring global inflation with the restriction of supply caused by the pandemic and the Ukrainian War, and internal, such as the growth of fiscal risk with President Jair Bolsonaro ( PL) increasing spending to improve their chances of reelection.
If, on the one hand, the outcome of the war and the end of the inflationary process are difficult to predict, the internal environment tends to become less unfavorable after the election period. This is the main variable considered for the expected recovery of the selected stocks.
The report selected 15 assets from just over two dozen nominations. The exclusion criterion was the price much higher than in the period immediately prior to the beginning of the pandemic or the presence of great volatility at this time, as is the case of the commodities sector linked to the exploration and export of oil.
The price/earnings multiple or index, an indicator used to measure the return of a stock, was the most applied criterion in the analyses, but not the only one.
The comments also considered issues such as the prospect of an improvement in the conjuncture that resulted in the devaluation of shares, in addition to specific expectations about each company mentioned.
O Bank of Brazil “the stock is currently trading at very low multiples”, according to analyst Leonardo Oliveira, from Lumi Research.
Oliveira considers that, in addition to being very discounted in relation to its peers in the private sector, BB’s shares are priced in a very pessimistic scenario for the bank, although the company is distributing high dividends and generating profitability on its assets.
Private companies controlled by state-owned companies also tend to benefit from the end of the election period, according to Oliveira. He cites the case of Wizan insurance company controlled by Caixa Econômica Federal.
The company is, in the analyst’s opinion, an example of a company that is discounted simply because of the fear of some type of loss eventually caused by an intervention in Caixa.
Bradescofor being “the most discounted of the private ones”, and Itau“the best managed” are bets in the banking segment for Idean Alves, head of the trading desk and partner of Ação Brasil Investimentos.
Alves also highlights Banco do Brasil as being, for many, the cheapest among the banks and also the one that “suffers the most from political risk” and “government interference”. For the specialist, in addition to the uncertain external scenario, the fiscal risk punishes the entire sector.
“A weaker economy generates less business and increases the risk of default, forcing banks to increase provisions for bad debts”, he assesses.
Suffering since the beginning of the pandemic, retail has solid and traditional companies with extremely undervalued shares on the stock exchange. Magazine Luiza, Via Retail and American are the main examples, according to Alves.
“Companies have fallen by more than 50% [neste ano]with a challenging economic scenario, unstable politics, high inflation and unemployment”, he comments. “They can recover if there is a reversal in the yield curve.”
Among the good consolidated companies in the retail sector that will also benefit in the event of a slowdown in inflation and a drop in interest rates are Vivara and Centauraccording to the partner at Brasil Investimentos.
It is also betting on the expectation of falling interest rates, he indicates the startup of the discount coupon branch Méliuz and the financial BTG Pactual and Pan Bank like long-term bets.
Also battered by the cost of credit and inflation, the construction sector has room for improvement on the stock market, according to Leandro Petrokas, a partner at Quantzed, a technology and education company for investors.
“The increase in interest rates and inflation reduces disposable income, as well as the rise in raw material costs”, he says.
“After this perfect storm, it is to be expected that the sector will perform well again, especially companies that do not have debts and that operate in large centers”, he says.
It draws attention to the growth potential of miter. The construction company operates in the capital of São Paulo in several segments, which gives it the ability to meet the demands of a city with a severe housing deficit. “We understand that current prices do not reflect the company’s ability to generate results in the medium term”, she comments.
The fuel distributor vibrate energy enters the Petrokas list because, despite the improvement in the operation since privatization in 2019, when it ceased to be a subsidiary of Petrobras, the company is traded below its potential price on the stock exchange.
“The company generates a lot of cash, pays reasonable dividends and is investing in new projects within other lines of business, such as renewable energy and gas distribution,” adds Petrokas.
Also below their multiples, the stock prices of Celesc (Santa Catarina Power Stations) do not reflect the improvement in the company’s results, according to the Quantzed partner.
“The company is reducing leverage, improving its capital structure and has a trigger [gatilho] medium term that would be its privatization”, he says.