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Petroleo Brasileiro Petrobras SA (ADR) (PBR), Itau Unibanco Holding SA (ADR) (ITUB), And One That’s Undervalued

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Investing in emerging markets can be risky, but these countries also offer some truly amazing long term buying opportunities for entrepreneurial investors with an adventurous spirit and the will to move beyond national borders when it comes to looking for the best investment alternatives.

Itau Unibanco Holding SA (ADR) (NYSE:ITUB) is remarkably well positioned for capitalize favorable secular tailwinds, and the company is trading at attractive valuations due to a transitory slowdown in Brazilian economic growth. This looks like a good time to take a position in this Brazilian financial powerhouse.

A high quality Buisness

After the 2008 merger of Itau and Unibanco, Itau Unibanco Holding SA (ADR) (NYSE:ITUB) became the biggest nongovernment bank in Latin America, it owns an undisputed leadership position in its home country Brazil, and it also has presence in neighboring countries like Chile, Argentina, Paraguay and Uruguay.

Source: Itau Unibanco istitutional pesentation

This size advantage means lower financing costs versus its competitors, and it also a puts the company in a position of strength when it comes to servicing global corporations and businesses with operations in different Latin American countries.

The Brazilian banking industry is supported by strong secular tailwinds, falling poverty levels and an expanding middle class bode particularly well for the sector. Credit and all kinds of financial services tend to move in tandem with disposable income, so economic development in Brazil translates into booming demand for the financial industry, and Itau Unibanco Holding SA (ADR) (NYSE:ITUB) is benefitting from this trend and delivering double digit growth rates.

Source: Itau Unibanco istitutional pesentation

Although economic indicators like credit/GDP and mortgage/GDP have been growing rapidly over the last years, they are still well below levels observed in developed countries. Macroeconomic tailwinds will continue producing above average growth opportunities for Itau Unibanco Holding SA (ADR) (NYSE:ITUB) for years to come.

Source: Itau Unibanco istitutional pesentation


Blame it on Rio

The Brazilian economy has been decelerating over the last years, GDP growth has come down from 7.5% in 2010 to 2.7% in 2011 and 0.9% in 2012. This comes as a consequence of a combination of factors, both external and internal.


Strong currency appreciation, global uncertainty and the slowdown in China are part of the problem, but also is loss of competitiveness due to a record low jobless rate and rising salaries over the last years. Taxes in Brazil are also high in comparison to other countries, and there are some infrastructure bottlenecks too.

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