Brazil Fund Manager Beating Peers Says Best Time to Buy in Years

  • Valuations and currency selloff make shares attractive
  • Inflation slowdown will be turning point for Brazil economy

The Brazil stock selloff that sent valuations to a six-month low is creating the best buying opportunity since the 2008 crisis, according to a Rio de Janeiro-based fund manager who outperformed 85 percent of peers this year.

Equities are a particularly good bet for foreign investors who stand to benefit when Brazil’s currency rebounds from a 12-year low over coming years,
James Gulbrandsen, the chief investment officer for Latin America at NCH Capital Inc., said in an interview. NCH’s flagship equity fund in Brazil, called Maracana, has lost 1.1 percent this year, compared to a decline of 9.2 percent for peers and 11 percent for the Ibovespa stock gauge.

“The only way to make money in equities is thinking as a contrarian,” Gulbrandsen said. “The investor should buy in bad times."

Brazil’s benchmark equity index has fallen 23 percent since a bull-market peak in May and reached the lowest price-to-estimated-earnings valuation since January on Monday as Latin America’s biggest economy heads toward its worst recession since the 1930s. As analysts ponder President Dilma Rousseff’s ability to weather a corruption scandal and push through legislation to shore up the budget, investors should be focused on Brazil’s efforts to curb inflation that’s running at the fastest in 12 years, Gulbrandsen said.

“When it starts to fade, people will start filling their bags in the shopping malls and the good times will be back," he said.

Brazil inflation will end 2015 at 9.29 percent and then slow to 5.5 percent in 2016, according to the median estimates in a weekly central bank survey of about 100 economists published Monday.

Brazil’s consumer companies are best poised to benefit as the economy rebounds, including clothing retailer Lojas Renner SA and shoemaker Grendene SA, Gulbrandsen said.

"There’s no reason for a foreign investor to keep money in expensive Standard & Poor’s 500 companies when they can buy assets in the country that’s the most significant in the Western Hemisphere after the U.S. and whose currency has lost a lot," Gulbrandsen said.

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