MCHI - EWZ: High Return Cheap Valuation And Prominent Position - Buy
2024-03-27 08:51:21 ET
Summary
- With changes in global geopolitics, Brazil is positioning itself as a great investment alternative in emerging markets.
- Brazil has strong competitive advantages in agriculture, mining and the oil industry. The country is positioned to be a big player in the energy transition.
- Despite its companies' excellent return on equity, EWZ trades at a 27% discount to its emerging market peers.
Investment Thesis
I recommend buying the iShares MSCI Brazil ETF (EWZ) which replicates the Brazilian stock market. Brazil has strong competitive advantages in its agriculture and should be an important global player in the energy transition. With a population of more than 200 million inhabitants , it is a consolidated democracy, and geopolitically distant from conflicts by maintaining a certain neutrality. Additionally, it trades below its peers with a Price / Earnings of 8x despite an excellent return on equity of 19%, higher than its peers.
Introduction
The iShares MSCI Brazil is an exchange-traded index fund that seeks to replicate the performance of the MSCI Brazil 25-50 Index. It has approximately 60 companies, covering around 85% of the total market value of companies that are traded on the Brazilian stock exchange. Below, we have the Brazilian companies with the greatest weight in the index:
Composition of the EWZ (ishares.com)
