Brazil Small Cap ETF Stock Picks (September 2023)
Brazil stock picks that are the holdings of the iShares MSCI Brazil Small Cap ETF (NASDAQ: EWZS) and/or VanEck Brazil Small-Cap ETF (NYSEARCA: BRF) as of mid-September 2023.
This post took longer than expected as it takes a closer look at all 122 stock pick holdings (as of mid-September) for the following Brazil ETFs:
iShares MSCI Brazil Small Cap ETF (NASDAQ: EWZS)
P/E: 8.92 / Yield: 3.55% (Yahoo! Finance)
VanEck Brazil Small-Cap ETF (NYSEARCA: BRF)
P/E: 10.59 / Yield: 3.25% (Yahoo! Finance)
Both of these Brazil ETFs are focused on smaller cap Brazilian stocks in a diverse range of sectors that have most of their exposure to the country, are in more traditional industries-sectors (agriculture, utilities, manufacturing, real estate, etc.) rather than tech (also see: Mexico Closed End Fund Stock Picks (Early 2023)), and have less exposure to global cyclicals e.g. MNC mining behemoth Vale (NYSE: VALE), etc.
Some highlights:
Out of the 122 stock pick holdings of EWZS and BRF, eleven have listings on the NYSE and seven have NASDAQ listings.
Two Brazilian oil stock picks focused on the redevelopment of mature production fields.
A number of Brazilian real estate stock picks. Some are developers focused on low or middle income housing projects while others focus on high-end properties, the management of shopping malls, or they acquire and manage rural agriculture properties.
A number of Brazilian agriculture stock picks focused on all kinds of agricultural commodities - including ethanol that helps to power the country’s cars.
A number of Brazilian manufacturing stock picks as in spite of China, the country is still a manufacturing powerhouse.
A number of Brazilian logistics stock picks - from port operators to intercostal shipping to integrated logistics solutions providers.
A number of Brazilian infrastructure stock picks - from utilities to renewable energy providers to highway operators.
A number of Brazilian consumer stock picks as as the country has the largest population in Latin America.
Plenty of other interesting Brazilian stock picks, including the owner of Havaianas - the world’s number one flip flop.
Here is a look at the more recent performance of both Brazil small cap ETFs covering the COVID period (the charts are linked back to Yahoo! Finance):
And the long term performance chart for both:
We also have a list of Brazil ADRs here and here is a screenshot of the list of Brazil ETFs from our website:
And here are the ETF charts when we add the two non-leveraged and non-small cap Brazil ETFs:
However, our September 5th post covered a podcast interview with an investor who understands Portuguese who made some interesting observations about Brazil. He questioned putting money into the country because if you speak Portuguese and watch the local news, “you would definitely not want to watch it…” Given the narrow (and I would add rather questionable…) election results and how much money is spent on Brazilian politics, he said that Lula has been unable to do anything constructive - except appoint old cronies into positions where they can profit from…
That might be a good thing given what happened the last time he was President: Operation Car Wash (Wikipedia…) or Operação Lava Jato (the Brazilian investigation site…) and the investigation of which that ensnared many corporations around Latin America.
In addition, the investor said in the interview that the Brazilian government is having trouble funding next year’s budget and they are looking for money from everywhere and everybody. This does not sound good for sovereign bond investors as well as for Brazilian companies who might find themselves in the crosshairs of government efforts to raise funds to fund itself.
These sorts of issues are why Charles de Gaulle once observed:
"Brazil is the country of the future... and always will be…"
(It’s not clear whether or not de Gaulle had also once said: "Brazil is not a serious country...")
With that said, here is a look at some key Brazil economic data:
More such economic charts are available when searching for Brazil on Trading Economics…
Getting back to Brazilian stocks, note the following listing requirements for the Novo Mercado (New Market) listing segment of B3 for the trading of shares issued by Brazilian stocks that commit themselves voluntarily to adopt corporate governance practices in addition to those that are required by law:
6.2 Financial Statements Translated into English. After the end of each fiscal year and of each quarter, the Company shall disclose, in the English language, all the consolidated or individual financial statements (if consolidated financial statements are not prepared), in conjunction with the management report, or comments on the performance of the Company and the opinion or report of special review of the independent auditors, according to the Brazilian law.
6.2.1 The disclosure of financial statements translated into English contemplated in subsection 6.2 must occur as of the release of the first periodic financial information (whether annual or quarterly) prepared after the securities issued by the Company begin to trade on the Novo Mercado.
6.2.2 The release of financial statements translated into English contemplated in subsection 6.2 must take place at the latest within fifteen (15) days after the Portuguese language financial statements is released, giving due regard to the timeframes prescribed by applicable law.
In addition, note that most of the English language Investor Relations sites for many of the Brazilian stocks in this post tend follow a similar pattern like this:
All of this makes Brazilian stocks (at least those trading on the Novo Mercado segment) much easier to research than many Asian and especially Chinese and Korean stocks (in particular…).
However, some of the stocks covered in this post STILL do not have clear descriptions on their IR pages or website as to what exactly it is that they do - a HUGE pet peeve of mine!
And thanks to the (increasingly maligning…) influence of ESG, some stock descriptions make it sound like the company is a non-profit charity trying to save the planet - not a for-profit business trying to sell a product or service…
Or the stocks have descriptions that were written by marketers trying to be clever…
To make your life easier, this post includes:
Which ETF or ETFs own the stock as a holding.
A clear description of the stock pick with links to the IR page (again, most have IR pages in English) and stock quote(s) on Yahoo! Finance.
A link to any Wikipedia page (for what it might be worth…)
Forward or trailing P/E and dividend yields linked back to the Yahoo! Finance statistics page. Note that some of the holdings are actually preference shares. In those cases where that is clear, key data and a chart are included for a non-preference listing.
The latest long term technical chart linked back to Yahoo! Finance.
And as always, this post is provided for informational purposes only (and to make your life easier by providing you with relevant information, links, and charts). It does not constitute investment advice and/or a recommendation…
NOTE: Holdings for both the iShares MSCI Brazil Small Cap ETF (NASDAQ: EWZS) and VanEck Brazil Small-Cap ETF (NYSEARCA: BRF) were as of September 14th data available on the ETF websites.
3r Petroleum Oleo E Gas Sa
(iShares MSCI Brazil Small Cap ETF / VanEck Brazil Small-Cap ETF)
3r Petroleum Oleo E Gas Sa (BVMF: RRRP3) is a company in the oil and gas sector with a focus on redevelopment of mature production fields located in onshore and offshore. “Redesign, Revitalize and Rethink” are the pillars that guide its strategy of increasing production and reserves in mature fields and that subsidize the goal of making it a large private and independent oil company, with a scale in Brazil and other countries in Latin America. The Company’s business plan is based on organic growth, through the redevelopment of the current portfolio, and inorganic growth, through opportunities to acquire mature assets.
The Company’s corporate purpose is to: (a) explore, produce and sell oil and its derivatives, natural gas and other fluid hydrocarbons, including, without limitation, the Brazilian sedimentary basins to which the National Petroleum, Natural Gas and Biofuels Agency – ANP (“ANP”) has granted licenses, as well as sedimentary basins abroad; (b) importing and exporting oil and any derivatives thus produced; and (c) participating in other companies as a partner, shareholder or quotaholder, in the country or abroad, that act in activities related to the Company’s corporate purpose
Forward P/E: 2.91 / Forward Annual Dividend Yield: N/A (Yahoo! Finance)
Adecoagro Sa
(VanEck Brazil Small-Cap ETF)
Adecoagro Sa (NYSE: AGRO) is an agro industrial company that produces and manufactures food and renewable energy. The company mainly operates through three segments: Farming; Sugar, Ethanol and Energy; and Land Transformation.
Forward P/E: 8.73 / Forward Annual Dividend Yield: 2.82% (Yahoo! Finance)
Aeris Indústria e Comércio de Equipamentos para Geração de Energia
(VanEck Brazil Small-Cap ETF)
Aeris Indústria e Comércio de Equipamentos para Geração de Energia (BVMF: AERI3) is a Brazilian wind blade manufacturer that operates in a strategic location, combining state-of-the-art facilities and effective processes through trained professionals to develop high quality products.
Forward P/E: N/A / Forward Annual Dividend Yield: N/A (Yahoo! Finance)
Aes Brasil Energia Sa
(iShares MSCI Brazil Small Cap ETF / VanEck Brazil Small-Cap ETF)
Aes Brasil Energia Sa (BVMF: AESB3) has been investing in Brazil for almost 25 years and is a 100% renewable electricity generator. The Company has a diversified portfolio, with installed capacity of approximately 4.2 GW in operation and 1.0 GW under construction (Tucano and Cajuína) for a total of 5.2 GW of exclusively renewable installed capacity.
Wikipedia (AES Corporation)
Forward P/E: 11.01 / Forward Annual Dividend Yield: N/A (Yahoo! Finance)
Afya Ltd
(VanEck Brazil Small-Cap ETF)
Bertelsmann backed Afya (NASDAQ: AFYA) is a leading medical education and digital health services group in Brazil based on number of medical school seats - delivering an end-to-end physician-centric ecosystem.
Afya is a leading medical education group in Brazil based on number of medical school seats, delivering an end-to-end physician-centric ecosystem that serves and empowers students and physicians to transform their ambitions into rewarding lifelong experiences from the moment they join us as medical students through their medical residency preparation, graduation program, continuing medical education activities and offering digital products to help doctors enhance their healthcare services through their whole career (See: Afya (NASDAQ: AFYA): Shares of Brazil's Leading Medical Education Group Struggle to Breakout)
Forward P/E: 13.74 / Forward Annual Dividend Yield: N/A (Yahoo! Finance)
Aliansce Sonae Shopping Centers Sa
(iShares MSCI Brazil Small Cap ETF / VanEck Brazil Small-Cap ETF)
Aliansce Sonae Shopping Centers Sa (BVMF: ALSO3) has a portfolio of 62 malls with over 11,000 stores distributed throughout 16 states. It is the largest manager of shopping centers in Brazil.
Wikipedia (Aliansce Sonae) In Portuguese…
Forward P/E: 12.89 / Forward Annual Dividend Yield: 4.42% (Yahoo! Finance)
