Mark Mobius’ Contrarian Case for Investing in Brazil (Mobius Blog)
In February, Franklin Templeton Investments’ Mark Mobius and his team traveled to Brazil to take a pulse-check of the business and economic environment there. He ended up writing this on his Investment Adventures in Emerging Markets blog:
I’m pleased to say that while Brazil certainly still has problems to work through, I’m a little more optimistic about the investment prospects there than I was six months or so ago—and that’s partly because everyone else seems so pessimistic!… I believe in about five years or so (maybe even sooner), the investment and economic climate in Brazil should look much brighter than it has in the past couple of years for a number of reasons.
In his blog post, Mobius noted the following:
- Franklin Templeton Investments has been investing in Brazil for decades and have always felt that state-owned companies there had a poor track record when it comes to corporate governance. However, Mobius hopes the heightened attention on corruption due to the recent scandals will help ignite management changes at the corporate level along with political reforms.
- Brazil is young and getting better educated. This means there is a strong and growing consumer market that’s also benefiting from the power of new technology – including mobile phone communications.
- Brazil has a “diverse list of key industrial and agricultural commodities that are in demand around the world, including not only oil but also soybeans, iron ore and sugar.”
- Low oil prices can be both a headwind and a tailwind as it helps consumers in Brazil’s trading partners while the energy sector itself is a relatively small part of the country’s economy with oil rents representing only 3% of GDP (2012).
- Brazil’s people are “more vocal and activist-oriented, and we don’t foresee the country as likely to head down the path of Argentina or Venezuela.”
- There are some “terrific managers in Brazil capable of developing and growing not only local businesses, but also moving into international markets.”
Mobius concluded by saying:
…it probably deserves a closer look, particularly the consumer-oriented sectors that have seen slower earnings as per-capita incomes and consumer spending has stagnated. We are also looking at Brazil’s banking sector right now which may offer good opportunities in the future.
…at this time we are actively looking to potentially increase our holdings in the country, particularly in world-class companies that previously were too expensive as well as others that we think have good prospects and appear to have solid management and little or no debt.
To read the whole post, A Contrarian Case for Brazil, go to Mark Mobius’ Investment Adventures in Emerging Markets blog on the website of Franklin Templeton Investments. In addition, check out our Brazil ETF list page.
- Investor Sentiment Survey: What Emerging Market Investors Think (Franklin Templeton)
- Mark Mobius’s Favorite Emerging Markets: Indonesia, Russia, Brazil, Vietnam and South Africa (WSJ)
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- Brazil: What’s Gone Wrong Plus Four Scenarios (Miami Herald)
- Brazil’s Argentina Moment (Project Syndicate)
- Latin American Stocks to Consider (Aberdeen)
- Brazil’s Giant Problem: The State (WSJ)
- Mark Mobius Answers Readers’ Questions (Mobius Blog)
- YPO CEO Survey: Brazil CEO Confidence Stagnates (YPO)
- Which Emerging Markets Have the Most Leveraged Stocks? (Bloomberg)