Brazilian stock investors should seek out companies least vulnerable to inflation and a slowdown in global economic growth as Europe’s debt crisis increases trading volatility, said Credit Suisse Group AG and Banco BTG Pactual.
Credit Suisse analyst Andrew T. Campbell and BTG’s Carlos Sequeira recommended investors buy “defensive” stocks such as phone operator Telecomunicacoes de Sao Paulo SA and meatpacker BRF Brasil Foods SA. Both analysts also called for cutting holdings of banks and homebuilders.
“We would buckle up our seatbelts and prepare for more volatility ahead,” Sequeira wrote in a note e-mailed to clients today. Investors should “prioritize stocks combining the following traits: high quality operations, sound business fundamentals, a good competitive positioning and recurring revenues,” he said.
The Bovespa index on Sept. 30 completed its largest quarterly drop since the last three months of 2008 as the fastest inflation in six years sparked declines in companies that depend on domestic demand while the slide in commodity prices sent producers lower. Telesp, as the unit of Spain’s Telefonica SA is known, and Brasil Foods were two of eight stocks on the 68-member benchmark to gain in the quarter, rising 9.7 percent and 21 percent, respectively. The Bovespa lost 16 percent.
Telesp rose 1.5 percent to 49.19 reais at the 4:15 p.m. New York time close, while Brasil Foods declined 2.3 percent to 31.45 reais. The Bovespa declined 2.9 percent.
Credit Suisse also added shopping-mall owner BR Malls Participacoes SA to its “Brazil model portfolio,” while BTG added toll-road operator Cia. de Concessoes Rodoviarias, securities clearinghouse Cetip SA - Balcao Organizado de Ativos e Derivativos and Multiplus SA, the frequent-flyer unit of Brazilian airline Tam SA, to its “10 Stock Ideas” list.