In the United States, you might be cautious about investing in homebuilders’ stocks, and understandably so. But it’s a different story in the emerging markets, particularly in Brazil, where falling mortgage rates and a government program to create more affordable housing could lead one stock to potentially double. I’ll give you the name of that stock in today’s video, and why I like it here.
Best wishes,
Rudy
P.S. Emerging-market builders are preparing for a booming year, and so should their shareholders! For all the best plays in Brazil and beyond, take my Emerging Market Winners service for a risk-free test drive today!
Video Transcript
Hi, this is Rudy Martin for Uncommon Wisdom Daily.
A couple weeks ago, I told you about the opportunities for massive profits in Brazil’s energy sector. But given the country’s economic boom and influx of foreign capital investment, I believe there are plenty of other ways to make money in Brazil as well.
High-end retailers are certainly reaping great rewards there. The Aston Martin dealer in Sao Paulo has been selling an average of one car per day since it opened, the best performance at any of the luxury car-maker’s 135 locations.
But it’s not just wealthy Brazilians who are doing so well. The country’s middle class is exploding in size, and that’s stimulating demand for other goods and services.
One of the best ways to take advantage of this trend is in Brazil’s financial sector, and I’ve told subscribers to my Emerging Market Winners service about several banks that are well-positioned to lend to Brazilian borrowers.
But the country’s real estate sector is also poised to take off. For many years, mortgage rates in Brazil were around 25%, among the highest in the world. But recently, rates have dropped dramatically, to around 11%, and they’re expected to fall even further.
Those sinking rates, combined with record-low unemployment and a government program to build more affordable housing, present an intriguing opportunity for investors.
Among Brazilian homebuilders, my top pick is Gafisa, traded on the New York Stock Exchange under the symbol GFA. It sells at just 4.2 times forward earnings, and just half of book value. By comparison, rival Rossi Residential sells at book, and Cyrela Brazil at about 1-and-a-half times book. For that reason, I think Gafisa could be set to double in price.
I’m Rudy Martin for Uncommon Wisdom Daily. Thanks for watching.
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Gafisa have a large amount of issues at the moment largely owed to the purchase of the low income housing developer Tenda in 2008 (inheriting a wealth of problems) and the impending slow down of the Brazilian RE market.