Tag Archives: CPL

Deutsche gets bullish on Brazil

Wall Street is finally catching on to what we have been saying for months: the Latin consumer is one of the most exciting investment stories out there.

Deutsche Bank added some fuel to the fire by recommending that clients go overweight on the Brazilian consumer discretionary and residential construction sectors. That sounds like good news for the Brazil consumer ETF BRAQ (quote), which aims to give investors exposure to just those stocks:

Brazil’s leading airlines got special upgrades. Deutsche likes GOL (quote) for its high profit margins and TAM (quote) because it provides exposure to what the bank sees as emerging consolidation in the space throughout Latin America.

Although Deutsche cut Brazilian utilities to “neutral” to make room in its model portfolio, it still upgraded Brazilian power company CPFL Energia (CPL, quote) as one of its top picks in the group.

Brazil Picks

Brazilian utilities are in play

Utilities are sometimes considered too confusing for casual investors to get involved with, but in Brazil, a wave of consolidation could make this an exciting sector — if you can trade it!

Follow the moving parts and pick your entry point: regional power company Neoenergia is looking to buy rival Elektro in a deal that could be worth up to $4 million.

It is hard to trade Neoenergia, but you can pick up its corporate overlord, Spanish utility Iberdrola (IBDRY, quote) as a proxy. Likewise, Elektro does not trade in ADR form and is not even a major constituent of the Brazil infrastructure ETF BRXX.

(It will be a 7% component of Emerging Global’s emerging markets utilities ETF when it launches, but so far that offering is indefinitely delayed.)

CPFL Energia (CPL, quote) and Cemig (CIG, quote) are also reportedly interested in Elektria, so you could possibly play the consolidation story by buying into one or both of these potential buyers.

Or buy into a basket of potential sellers via BRXX. The portfolio may not contain Elektria, but is 11% weighted to power companies including CPL and CIG along with several more obscure regional names.

The roll-up of Brazil’s telecom sector was a huge opportunity for investors several years ago. Rolling up the power companies could be equally exciting in the next few years.

Analysis Brazil ETFs