Investing "Cheap" Brazil

In a recent article in the Wall Street Journal the country of Brazil was highlighted along with the entire emerging markets sector as "cheap" based on valuations. The Bovespa, which is the major Brazilian stock index, is trading with a P/E ratio of 9.2 , below the 12.0 for the US and 9.7 for the Stoxx Europe 600.

In 2011 the Brazilian economy expanded by 2.7% and recent estimates have 2012 coming in at 2.5% and 2013 at 4.3%. The situation in Europe has weighed heavily on the country, however a government willing to stimulate the economy could boost the future growth. The valuations combined with good growth numbers make Brazil attractive as a long-term investment option.

Brazil ETFs

• iShares Brazil ETF ($EWZ) invests in the large-cap stocks in the country.
• EG Shares Brazil Infrastructure ETF ($BRXX) is a niche ETF that focuses on infrastructure-related stocks in the country. With the World Cup and Olympics coming to Brazil in the next few years it could spend upwards of $1 trillion on infrastructure.

Brazil Stocks

• Brasil Foods ($BRFS) is a food supplier in the country that has pulled well back from higher earlier in the year and is now trading with a PEG of 0.72 - extremely undervalued.
• CIA Energetica Minas Gerais ($CIG) is a large utility company in Brazil with a 3.5% dividend yield.