BRAZILIAN EQUITY OPPORTUNITIES<BR>
ISSUE III – JULY 2022
This report examines the Brazilian equity markets, their structure, constituents and
metrics over time. In continuation to our earlier reports on Brazilian Equity Opportunities,
we show that the Brazilian equity markets now offer a compelling investment
opportunity. There are 337 actively traded companies in Brazil1, offering a sizeable
group of businesses for superior stock selection.
Brazil has a deeply rooted equity culture and B3 – BRASIL BOLSA BALCÃO, founded in 1890, has had a long history of services provided to the stock market and the Brazilian economy. In 2000, BOVESPA led a program of integration with the eight other Brazilian exchanges to concentrate all equity trading in a single environment. B3 – BRASIL BOLSA BALCÃO was founded in May 2008 with the integration between BM&F, Brazil’s main derivatives exchange, and BOVESPA, the stock exchange. B3 – BRASIL BOLSA BALCÃO was created with the merger of BM&FBOVESPA with CITEP in 2017 and is the sole exchange, despite the market being open for a competitor since 2007. Stocks are exclusively traded through an exchange (Dark pools, MTFs and internalization prohibited). It is also the provider of central counterparty and securities custody services. In addition, B3 – BRASIL BOLSA BALCÃO ranks among the world’s leading exchanges by market capitalization and the largest in the Americas (outside of the US).
HORIZON PROCESS
Idea generation is a rigorous and often contrarian process and adherence to fundamental discipline in volatile markets is tantamount to success. At the core of our process is identification of securities and sectors for investment along with an on-going maintenance of the valuation and event universe to provide advanced insights to unfolding investment landscapes. Some of the characteristics we look for:
Brazil has a deeply rooted equity culture and B3 – BRASIL BOLSA BALCÃO, founded in 1890, has had a long history of services provided to the stock market and the Brazilian economy. In 2000, BOVESPA led a program of integration with the eight other Brazilian exchanges to concentrate all equity trading in a single environment. B3 – BRASIL BOLSA BALCÃO was founded in May 2008 with the integration between BM&F, Brazil’s main derivatives exchange, and BOVESPA, the stock exchange. B3 – BRASIL BOLSA BALCÃO was created with the merger of BM&FBOVESPA with CITEP in 2017 and is the sole exchange, despite the market being open for a competitor since 2007. Stocks are exclusively traded through an exchange (Dark pools, MTFs and internalization prohibited). It is also the provider of central counterparty and securities custody services. In addition, B3 – BRASIL BOLSA BALCÃO ranks among the world’s leading exchanges by market capitalization and the largest in the Americas (outside of the US).
HORIZON PROCESS
Idea generation is a rigorous and often contrarian process and adherence to fundamental discipline in volatile markets is tantamount to success. At the core of our process is identification of securities and sectors for investment along with an on-going maintenance of the valuation and event universe to provide advanced insights to unfolding investment landscapes. Some of the characteristics we look for:
- Discount to Private Trade Sale Valuations
- A margin of safety during periods of uncertainty is essential
- Attractive risk adjusted returns
- Low PEG ratio
- Strong corporate governance
- Oriented for the growth of the Brazilian economic area
- Meaningful free cashflow