How You Can Profit from Brazil’s Consumer-Sector Growth

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

Brazil is a large and wealthy country. It is the fifth-largest country in the world by population and the largest in South America by far. Brazil also has the highest gross domestic product (GDP) in South America, whether measured nominally or by purchasing power parity. In effect, the Brazilian consumer is poised to buy. One exchange-traded fund (ETF) that focuses on this enormous market is Global X Brazil Consumer ETF (BRAQ).

This non-diversified fund seeks to replicate, before fees and expenses, the performance of an index designed to measure the rise of consumer-sector equities wedded to Brazil. The index invests in 20-40 companies either located in Brazil or whose primary revenue comes through the Brazilian consumer sector.

Even after the correction triggered by talk of an Argentinean default at the end of last week, BRAQ is up 7.61% for the year. Its yield is 1.16%.

BRAQ_080614

The top 10 holdings of this ETF represent 48.37% of its total assets. The top five of these holdings are Kroton Educational SA, 5.23%; BRF Brasil Foods SA, 5.10%; JBS SA, 5.00%; Companhia Brasilieira, 4.98%; and Lojas Americana PFD, 4.98%. As expected, the sectors in which the fund is invested are primarily consumer oriented, including consumer defensive, 54.09%, and consumer cyclical, 32.33%.

While wages and employment may be stagnating or barely gaining in the United States and the euro zone, the younger and increasingly well educated populations of the developing world, including Brazil, offer a potentially high-growth future consumer market. One way to tap into that future is through Global X Brazil Consumer ETF (BRAQ).

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In case you missed it, I encourage you to read my article from last week about Brazilian small-cap ETFs. I also invite you to share your thoughts below.

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The fall of European equities, as well as the recent downtrend in U.S. markets, might make you think that the bear has invaded the entire globe. Well, if you thought that, then you haven’t been looking far enough to the east.

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