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BlackRock LatAm star Landers eyes Brazilian large cap bounce
by Matthew Goodburn on Jan 16, 2013 at 18:37
The trust's overweight to large cap Brazilian stocks dragged on performance in 2012, but Landers is confident that many of Brazil’s largest companies will see positive re-ratings this year.
Landers is encouraged by the relative valuation of Brazil, which is trading at 10.5x earnings as opposed to Mexico’s 16x earnings.
Landers used weakness in the fourth quarter of 2012 to top up on largest holding, Brazilian mining giant Vale, on the view that its management had scope to improve margins further as well as the first quarter of the year being traditionally a good time to profit from strong iron ore prices.
Increasing Brazilian banks and infrastructure
He has also increased his exposure to Brazilian Banks Banco Bradesco and Banco Itau as well as to infrastructure through Brazil’s largest toll road operator CCR.
Landers has increased Vale to 9.5% of the portfolio, at the expense of Petrobras which has been trimmed back to a larger underweight position albeit still the fund’s fourth largest holding.
He told Citywire: ‘A lot of our large cap stocks in Brazil underperformed last year which hurt performance but we think they are due for better performance. Vale is a short term call based on our view that we expect the iron ore price to move up. The management team that came in one and a half years ago are also doing a good job selling some non-core mining and oil assets.’
Landers has been reducing his Petrobras stake on the view that the firm is some way behind Vale in terms of restructuring its business model to improve margins.
‘It is an underweight now but the management are taking the right steps so it should improve its margins and production growth by mid-2014, but it still has a lot of proving to do.’
As well as being underweight Petrobras, Landers is continuing to steer clear of steelmakers and telecom firms in Brazil preferring instead to increase his exposure to the boom in credit growth in Brazil.
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