Understandably so. South America’s largest economy is growing at a healthy clip of 4 percent in 2006. Brazil is the only major global economy where interest rates are actually falling, free of the headwind that most other global stock markets are facing.
More importantly, U.S. investors are also generating a lot more profits in Brazil than in its higher-profile rivals. Domestic Brazilian stock market investors are up 43% since the beginning of 2005, with about 18% of that coming this month. Savvy U.S. investors have earned much more than that over the same period — about 69% — once you factor in the Brazilian Real’s appreciation against the U.S. dollar.
This week’s Global Bull Market pick — Uniao de Bancos Brasileiros S.A. (Unibanco) (UBB) — is the best way to play the Brazilian bull market and benefit from the appreciating Real.
Unibanco is Brazil’s fifth-largest bank. It was also the first Brazilian bank to be listed on the NYSE. That means U.S.-style accounting principles and an investor-friendly attitude.
Unibanco is also one of the steadiest and fastest-growing banks around, with its client base growing at 37% a year. What is the secret to its success? Unibanco focuses on well-timed acquisitions and high margin activities such as consumer finance, credit cards and auto financing in Brazil’s booming market.
What’s going to push this stock even higher? An earnings announcement coming February 17th that I believe will surprise on the upside. The last time around net and operating income grew by 46% and 51% respectively, well above Unibanco’s historical levels.
So buy Unibanco (UBB) at market today, and place your stop at $67.25. For potentially quick double-digit profits, buy the July $80 Calls (UBBGP.X)
PORTFOLIO UPDATE
It seems that global market jitters disappeared as suddenly as they arrived, with the Japanese market again hitting record highs by the end of last week.
Your position in NII Holdings (NIHD) had a strong week with the stock up almost 5%. Take profits on one-half of your options (QHQCI.X) to lock in a 69% profit. Adjust your stop to $45.50.
Last week’s recommendation, China Petroleum & Chemical (SNP), is up 6% already. SNP options are up 33%. Go ahead and move your stop to $51.50.
Gold Field’s Ltd (GFI) announced a sixfold (!) increase in earnings on Thursday, and the stock is up over 9%. The options are up 54% in two short weeks. Move your stop up to $17.80.
Woori Financial (WF) and Webzen (WZEN) are recovering strongly after the prior week’s mini-crash in Asian markets, and were up a solid 10% and 12% respectively this past week.
Teva (TEVA) completed its acquisition of IVAX on January 26th. Now that the merger arbitrage hedge funds have exited the market, this Global Bull Market workhorse has already begun its rebound from its currently oversold position.
I look forward to seeing some of you at the World Money Show (www.worldmoneyshow.com) later this week in Orlando, Florida. My presentation is on Feb. 3rd: "The Top Ten Global Bull Stocks You Must Own in 2006." Be sure to mention priority code 005440 for your FREE admission!
