As the interest rates go up in the U.S., emerging markets (EM) currencies, stocks and bonds declined sharply. As a matter of fact, last month, the Brazilian real depreciated 7% to 2.14 reals (R$) per U.S. dollar, which is close to the currency’s four year low. Given that the current upside trend of U.S. interest rates is here to stay, most probably, the Brazilian currency will keep depreciating itself against the U.S. dollar. Now, who benefits? Naturally those companies that have their revenue in U.S. dollars and their costs in reals are the ones that should benefit the most. The real’s depreciation should help Brazilian producers competing with imports and Brazilian exporters competing on the global stage.
Let’s see what might happen to the finances of my top three picks if the Brazilian real depreciates by a further 12% against the U.S. dollar by the end of 2014.
Local prices set at international levels
Braskem SA (ADR) (NYSE:BAK), the largest producer of petrochemical products in Latin America, sets its local prices at international parity. Having its costs denominated in local currency, it should benefit enormously from the depreciation of the real. After having increased in value by more than 30% at one point earlier in the year, the shares are now up by a mere 9.5%.
Since Braskem has 100% of its revenue denominated in U.S. dollars, 80% of its costs of goods sold (COGS) in U.S. Dollars and 70% of its debt in U.S. dollars, a further 12% depreciation of the real would have a positive impact of 56% on 2014 EBITDA.
Trading at 5.7 times the 2013 EV/EBITDA and at a P/E of 10.5, I think Braskem SA (ADR) (NYSE:BAK) is a good long idea to benefit from the real’s depreciation.
A cheap miner with a lot to gain from a currency depreciation
Vale SA (ADR) (NYSE:VALE), being one of the biggest iron ore producers in the world, and has a substantial portion of its revenues priced in U.S. Dollars owing to its exporter profile. Besides, only 25% of its COGS are denominated in U.S. Dollars.
Since 81% of the company’s revenues are denominated in U.S. Dollars and 58% of its total debt is denominated in the American currency, a 12% depreciation of the real by 2014 would have a 30% positive impact on Vale’s 2014 EBITDA.
Being down by almost 32% YTD, Vale SA (ADR) (NYSE:VALE) now trades at 4.9 times the 2013 EV/EBITDA and a P/E of 6.5. It pays a 2.8% cash dividend. I think Vale is a good equity long idea given its unique resource profile, its current valuation, and the potential gains that may arise from the depreciation of Brazil’s currency.
Gerdau SA (ADR) (NYSE:GGB), the largest long steel producer in Latin America, competes directly with imports and also benefits from a weaker real. In this case, given the nature of Gardau’s business catering mostly to Brazilian clients, the impact on EBITDA in 2014 should be significantly smaller than in the two previous cases.
Gardau has 42% of its revenue, 39% of its COGS, and 77% of its net debt in U.S. dollars. The positive 2014 EBITDA impact of 12% depreciation in the real should be around 6%. That said, the company, which is down 36% YTD, trades at an interesting level. Gerdau SA (ADR) (NYSE:GGB) sells for 70% of its 2013 book value and trades at 6.2 times the 2013 EV/EBITDA.
The bottom line
The three companies mentioned above have a lot to gain from the depreciation of the Brazilian real. Even if the impact on Gerdau’s EBITDA is significantly smaller than in the cases of Braskem and Vale, the steel company should largely benefit from diminished competitive pressures, the reason being that imports will be significantly more expensive in local currency terms if the real loses even more value. My favorite pick among this three companies is Braskem, however. While the company does not depend on international markets to sell its products (like Vale), it sells everything at international prices, which are denominated in U.S. dollar terms.
Federico Zaldua has no position in any stocks mentioned. The Motley Fool owns shares of Companhia Vale Ads. Federico is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Artificial intelligence is the greatest investment opportunity of our lifetime. The time to invest in groundbreaking AI is now, and this stock is a steal!
It’s the revolution reshaping every industry on the planet.
From driverless cars to medical breakthroughs, AI is on the cusp of a global explosion, and savvy investors stand to reap the rewards.
Here’s why this is the prime moment to jump on the AI bandwagon:
Exponential Growth on the Horizon: Forget linear growth – AI is poised for a hockey stick trajectory.
Imagine every sector, from healthcare to finance, infused with superhuman intelligence.
We’re talking disease prediction, hyper-personalized marketing, and automated logistics that streamline everything.
This isn’t a maybe – it’s an inevitability.
Early investors will be the ones positioned to ride the wave of this technological tsunami.
Ground Floor Opportunity: Remember the early days of the internet?
Those who saw the potential of tech giants back then are sitting pretty today.
AI is at a similar inflection point.
We’re not talking about established players – we’re talking about nimble startups with groundbreaking ideas and the potential to become the next Google or Amazon.
This is your chance to get in before the rockets take off!
Disruption is the New Name of the Game: Let’s face it, complacency breeds stagnation.
AI is the ultimate disruptor, and it’s shaking the foundations of traditional industries.
The companies that embrace AI will thrive, while the dinosaurs clinging to outdated methods will be left in the dust.
As an investor, you want to be on the side of the winners, and AI is the winning ticket.
The Talent Pool is Overflowing: The world’s brightest minds are flocking to AI.
From computer scientists to mathematicians, the next generation of innovators is pouring its energy into this field.
This influx of talent guarantees a constant stream of groundbreaking ideas and rapid advancements.
By investing in AI, you’re essentially backing the future.
The future is powered by artificial intelligence, and the time to invest is NOW.
Don’t be a spectator in this technological revolution.
Dive into the AI gold rush and watch your portfolio soar alongside the brightest minds of our generation.
This isn’t just about making money – it’s about being part of the future.
So, buckle up and get ready for the ride of your investment life!
Act Now and Unlock a Potential 10,000% Return: This AI Stock is a Diamond in the Rough (But Our Help is Key!)
The AI revolution is upon us, and savvy investors stand to make a fortune.
But with so many choices, how do you find the hidden gem – the company poised for explosive growth?
That’s where our expertise comes in.
We’ve got the answer, but there’s a twist…
Imagine an AI company so groundbreaking, so far ahead of the curve, that even if its stock price quadrupled today, it would still be considered ridiculously cheap.
That’s the potential you’re looking at. This isn’t just about a decent return – we’re talking about a 10,000% gain over the next decade!
Our research team has identified a hidden gem – an AI company with cutting-edge technology, massive potential, and a current stock price that screams opportunity.
This company boasts the most advanced technology in the AI sector, putting them leagues ahead of competitors.
It’s like having a race car on a go-kart track.
They have a strong possibility of cornering entire markets, becoming the undisputed leader in their field.
Here’s the catch (it’s a good one): To uncover this sleeping giant, you’ll need our exclusive intel.
We want to make sure none of our valued readers miss out on this groundbreaking opportunity!
That’s why we’re slashing the price of our Premium Readership Newsletter by a whopping 70%.
For a ridiculously low price of just $29, you can unlock a year’s worth of in-depth investment research and exclusive insights – that’s less than a single restaurant meal!
Here’s why this is a deal you can’t afford to pass up:
• Access to our Detailed Report on this Game-Changing AI Stock: Our in-depth report dives deep into our #1 AI stock’s groundbreaking technology and massive growth potential.
• 11 New Issues of Our Premium Readership Newsletter: You will also receive 11 new issues and at least one new stock pick per month from our monthly newsletter’s portfolio over the next 12 months. These stocks are handpicked by our research director, Dr. Inan Dogan.
• One free upcoming issue of our 70+ page Quarterly Newsletter: A value of $149
• Bonus Reports: Premium access to members-only fund manager video interviews
• Ad-Free Browsing: Enjoy a year of investment research free from distracting banner and pop-up ads, allowing you to focus on uncovering the next big opportunity.
• 30-Day Money-Back Guarantee: If you’re not absolutely satisfied with our service, we’ll provide a full refund within 30 days, no questions asked.
Space is Limited! Only 1000 spots are available for this exclusive offer. Don’t let this chance slip away – subscribe to our Premium Readership Newsletter today and unlock the potential for a life-changing investment.
Here’s what to do next:
1. Head over to our website and subscribe to our Premium Readership Newsletter for just $29.
2. Enjoy a year of ad-free browsing, exclusive access to our in-depth report on the revolutionary AI company, and the upcoming issues of our Premium Readership Newsletter over the next 12 months.
3. Sit back, relax, and know that you’re backed by our ironclad 30-day money-back guarantee.
Don’t miss out on this incredible opportunity! Subscribe now and take control of your AI investment future!
No worries about auto-renewals! Our 30-Day Money-Back Guarantee applies whether you’re joining us for the first time or renewing your subscription a year later!
I work for one of the largest independent financial publishers in the world – representing over 1 million people in 148 countries.
We’re independently funding today’s broadcast to address something on the mind of every investor in America right now…
Should I put my money in Artificial Intelligence?
Here to answer that for us… and give away his No. 1 free AI recommendation… is 50-year Wall Street titan, Marc Chaikin.
Marc’s been a trader, stockbroker, and analyst. He was the head of the options department at a major brokerage firm and is a sought-after expert for CNBC, Fox Business, Barron’s, and Yahoo! Finance…
But what Marc’s most known for is his award-winning stock-rating system. Which determines whether a stock could shoot sky-high in the next three to six months… or come crashing down.
That’s why Marc’s work appears in every Bloomberg and Reuters terminal on the planet…
And is still used by hundreds of banks, hedge funds, and brokerages to track the billions of dollars flowing in and out of stocks each day.
He’s used this system to survive nine bear markets… create three new indices for the Nasdaq… and even predict the brutal bear market of 2022, 90 days in advance.
