r/stocks
Today (Jun/26) my country stock market is suspiciously cheap again, where is the catch ?
Author questions why Brazil's market (EWZ) dropped 20% despite solid fundamentals, seeing an opportunity but fearing a hidden catch.
- The Brazilian market appears fundamentally undervalued after a 20% dip.
- Macroeconomic factors like expected interest rate cuts should benefit the broader economy.
- Political stability and a relatively mild dividend tax support long-term investment.
- Foreign capital exit and profit-taking ahead of IPOs are driving the market down.
- US tariffs and political scandals are creating negative sentiment.
- There might be hidden fundamental issues causing the persistent cheapness.
I'm in the brazilian market, since April/26 our market (EWZ) took a 20% dip. According to our news sources its due to: foreign capital exit; the upcoming infamous IPOs, investors realizing profits; the new dividends tax; USA Government tariffs (that exclude goods to USA consumer market); Political scandal in the opposition, who aren't the economy governors.
Nevertheless, fundamentally it doesn't make any sense at all: our new dividends law tax isn't as aggressive as US market; we have companies that still have the same fundaments and values as the last year; our "Brazilian FED" interest rate should fall finally, benefiting companies and consumers; our government is very centrist and left wing in name only (like UK Labour Party and SPD and German), the other political wing project is not grounded on reality.
And the stocks became "cheap" again as last year, for a beginner like me, it looks like opportunity. but i'm very suspicious of some fundamental issue i'm my letting pass, but i can't find it. Have you ever seem such a scenario ?
The catch is, that it’s gonna keep going down this time
In my country, we have publicly traded companies that operate as oligopolies, or the government steps in to ensure they don’t fail. Because of that, they have a unique moat, and I usually buy them when they trade at a discount. I ignore the rest of the market because our economy is generally uncompetitive and unproductive compared to the USA.
Alot of countries stock markets are like this. Usually these companies are a huge part of the national economy. What country from interest?
Canada, though our largest producer of our GDP is real estate which our country doesn’t have any major public traded company that really fits what I said. It’s more with telecommunications or railways or utilities… Our aerospace, airline, grocery sector kind of fits this too but less so…
Most countries are like this.
South Korea is just two companies.
Taiwan just one
Netherlands just one
Aus UK Can maybe a couple each
Just like Brasil then. Our main stocks are some twenty too big to fail companies.
That's an interesting view about the Moat. Since there are some companies too big to fail, this fact itself can be the Moat.
If you take JBS which is the largest meat packer in world.
Yup exactly. Speaking about meat, our beef is so expensive we are importing beef from New Zealand and Australia. More so our government is in talks with your trading bloc about beef imports. Our steak is about R$267.38 p/kg.
IMO you need to do fundamental analysis on individual stocks if you're going to do this, and you can do well.
If you want to be an index investor then just buy a tracker of a world index - you can't know whether or not Brazilian stocks will outperform the rest of the world over the next 10 or 20 years, so buying the dip is foolish trading.
Yeah, Brazil is down 20% today, the S&P 500 is down 5% this week - you don't know what's going to happen next but, perhaps more importantly, you don't know what's going to happen with inflation and currency exchange rates. If you're an index investor then just stay passive, invest in the whole world and then you've got diversification.
If live in an emerging market and you're prepared to do the work of reading company reports then I think you can probably do quite well. Your income is in reals, you invest in reals - you don't need to care about the exchange rate or what the rest of the world is doing. An asset class can out- or under-perform for a decade at a time, and you can cruise through that.
If you find a regional grocery chain which is making a profit - it has low debt, it's been growing sales for 5 years, it's opening stores, it has competent management and you believe them when they say they're going to be big in adjacent states in 5 years and a national grocery chain in 10 years, then buy the stock. You understand the market better than a hedge fund manager and you're not subject to the same (negative) constraints that they are. But a political scandal in the opposition doesn't matter, because that's not what makes a company profitable over the next 5 or 10 years.
Your goal as an investor should simply be to purchase, at a rational
price, a part interest in an easily-understandable business whose
earnings are virtually certain to be materially higher five, ten and
twenty years from now. Over time, you will find only a few companies
that meet these standards - so when you see one that qualifies, you
should buy a meaningful amount of stock. You must also resist the
temptation to stray from your guidelines: If you aren't willing to own a
stock for ten years, don't even think about owning it for ten minutes.
Put together a portfolio of companies whose aggregate earnings march
upward over the years, and so also will the portfolio's market value.
-- Warren Buffett, 1996
That's what i'm doing. Or trying to do.
There are some individual stocks absolutelly worthy, by the fundamentals.
You just have to have a lot of patience then. Buffett also talks about buying stocks as if the market might close tomorrow and not reopen for another 10 years. Stock prices can stay "wrong" for a long time, but eventually they must reflect the company's fundamentals (or pay out steady dividends).But it can take a long time.
Petrobras has nice tailwinds with an elevated oil price and they are investing in more production and exploration
I'm invested in PAGS and been taking a beating on it lately. I'm not selling. I can't see what's so bad about the company or the Brazilian economy. Looks like a value buy opportunity to me.
That being said I don't ever see Brazilian stocks rising above the low end of fairly valued. Not with the interest rates there sucking all the local money into bonds.
Pags is a good stock IMO. Neither i would sell.
The interest rates are a bit absurd