Cashing in on the World Cup and Olympics in Brazil: Anheuser-Busch InBev NV (BUD)

Page 1 of 2

We’ve all heard the disappointing news coming from team BRIC: Brazil’s boom has slowed to a trickle with GDP growth in 2012 predicted to be just 1%. The lofty 3.1% figure previously touted by the Brazilian Central Bank turned out to be achievable, but only through some, err, inventive accounting. Brazil’s growth prospects remain uncertain, but one thing is for sure: the upcoming World Cup and Olympics Games are going to be huge drivers of infrastructure spending. This presents several significant investment opportunities. Before discussing them, let’s first take a closer look at the country’s economic climate.

Anheuser-Busch InBev NV (ADR) (NYSE:BUD)Even with Brazilian Bank Itaú predicting a 1.5% boost in GDP from the World Cup alone, there is good reason to proceed with caution if you’re looking to increase your exposure to the Brazilian market in the near future. The credit-driven consumption that drove Brazil’s growth in the past decade is now slowing. Even with state-owned banks offering low interest rates, households are becoming more and more unwilling to borrow. Twenty-three percent of disposable income is now tied up servicing existing debt from purchases of things like cars, televisions, and home appliances. This is cause for concern, especially in a country where an estimated 80% of GDP is tied to consumption. That said, nearly 165 million potential consumers in the country are predicted to spend between $3 billion and $6 billion by the end of 2013.

Another source of worry is China. Brazilian commodity exports, mostly heading for China, more than doubled since 2005 and now account for 14% of GDP. But with Chinese growth rates and global commodity prices beginning to fall, Brazil’s medium and long term growth prospects are put in jeopardy.


Opportunity

Over the next four years, the government plans to spend R$955 billion (around US$470 billion) on 12,265 projects to improve roads, railroads, seaports, airports, stadiums as well as the country’s energy generation and distribution systems.

The important thing to realize is just how desperately Brazil’s infrastructure needs every penny.

The country that is about to host the two largest mega-events in the world is a country where 14% of roads are paved (most of them in São Paulo). It’s a country who’s infrastructure ranked 104th out of 142 countries in a World Economic Forum survey. The huge need for timely infrastructure improvements coupled with the anticipated government expenditure translates into a significant opportunity for investors.

The first thing to do is take a close look at the EGShares Brazil Infrastructure ETF, which is comprised of 30 leading companies that represent Brazil’s infrastructure sectors. The Top 10 holdings and weightings are

  1. Ultrapar Holdings Inc (UGPA3): 6.31%
  2. Basic Sanitation Company of the State of Sao Paulo (SBSP3): 5.83%
  3. CCR SA (CCRO3): 5.76%
  4. Embraer S.A. (EMBR3): 5.54%
  5. CESP – Cia Energetica de Sao Paulo Pfd Shs -B- (CESP6): 5.25%
  6. CPFL Energy SA (CPFE3): 5.09%
  7. BR Malls Participacoes S.A. (BRML3): 4.95%
  8. Tractebel Energia S.A. (TBLE3): 4.86%
  9. Gerdau SA (GGBR3): 4.64%
  10. Weg SA (WEGE3): 4.05%
Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!