Investing in Bradesco: building on its presence

Bradesco is the third-largest bank in Brazil. Unlike in most developed countries where small banks and credit unions are always present, in Brazil, the bank industry has a well-established oligopoly, where the 4 major banks have around 70% of the market share together. This oligopoly along with the high switching-cost in the bank industry gives these 4 banks a good pricing advantage.

The bank industry in Brazil is also conservatively regulated and highly lucrative, with spreads north of 10%. These two factors reduce considerably the risk for small investors in these banks.

Bradesco has over $800 Billion in assets. Its main two segments are banking and insurance, with each contributing almost equally to the company’s bottom-line.

With 4600 branches throughout the country, Bradesco is the only of the major banks to be present in every city in Brazil. This strong presence will allow Bradesco to take advantage of Brazil’sgrowth over the next decades.

Easy Brazil Investing Rating

Bradesco’s competitive advantage is built on its presence, brand, scale, high switching-cost and the oligopoly in the industry. These factors along with the exposure to a fast-growing market, grant Bradesco the highest EBI Rating: 5 stars.

Banco Bradesco S.A.

ADR Ticker BBD
Bovespa Ticker BBDC3, BBDC4
Latibex Ticker XBBDC
Website http://www.bradescori.com.br/site/conteudo/home/default.aspx?idiomaId=2
Industry* Banks, Insurance
EBI Rating 5-star

Santander Brasil: Decent Investment with potential mid-term upside

Santander is the fourth-largest bank in Brazil. Unlike in most developed countries where small banks and credit unions are always present, in Brazil, the bank industry has a well-established oligopoly, where the 4 major banks have around 70% of the market share together. This oligopoly, along with the high switching-cost in the bank industry, gives these 4 banks a good pricing advantage.

The bank industry in Brazil is also conservatively regulated and highly lucrative, with spreads north of 10%. These two factors reduce considerably the risk for small investors in these banks.

Santander Brasil has around $200 Billion in assets and 2,000 branches. While it still does not have the profitability shown by Banco do Brasil, Itau Unibanco and Bradesco; Santander’s forecast is to grow its credit portfolio faster than the competition in the next years and reach that level of profitability. Because that profitability is currently not built into the stock price, if they really deliver what they are promissing, the stock will adjust considerably in the next years. That has proven to be hard to achieve in the recent years though.

Easy Brazil Investing Rating

Santander benefits from the banking industry fundamentals in Brazil that is very favorable with high switching-cost, oligopoly, conservative regulation and high spreads.

These factors along with the exposure to a fast-growing market, gives Santander a solid investment case which receives the 4 stars EBI Rating. In the banking industry, Itau Unibanco and Bradesco still has a better rating due to their higher profitability and larger scale.

Banco Santander Brasil S.A.

ADR Ticker BSBR
Bovespa Ticker SANB11, SANB3, SANB4
Investor Relations Website http://www.ri.santander.com.br/Default.aspx
Industry* Banks, Insurance
EBI Rating 4-star

Ambev: Great Long-Term Investment. Cheers!

Ask any Brazilian what is their favorite beer and you are likely to get one of these three answers: Skol, Brahma or Antarctica. Since we are talking about Ambev in this post, you must be guessing Ambev owns Skol, which is the dominant beer brand in Brazil. That’s partly right. Ambev does own Skol. But Ambev also owns Brahma and Antarctica. That’s right: they own all three dominant beer brands in Brazil. Together, these three brands have around 70% of the market share in Brazil. On top of that, the brand preference by the consumers’ taste gives Ambev a good pricing power and they have been able to smoothly pass cost increases to the consumers and to keep margins up.

Ambev also owns Premium brands like Antarctica Original and Bohemia. Premium beer has a good growing outlook in Brazil and Latin America over the next decades due to the growing countries’ middle-class.

Ambev is present in 14 countries in the Americas and they lead in 6 of the countries where they operate: Brazil, Argentina, Canada, Paraguay, Uruguay and Bolivia.

They also distribute Pepsi and Quilmes in most countries in South America, Budweiser in Canada and Brazil and Stella Artois in South America and Canada.

Easy Brazil Investing Rating

Ambev’s competitive advantage is built on its brands, distribution network and scale. All these factors along with the exposure to fast-growing markets, grant Ambev the highest EBI Rating: 5 stars.

Ambev – Companhia de Bebidas das Américas

ADR Ticker ABV, ABVC
Investor Relations Website http://ir.ambev.com.br/default_en.asp?idioma=1&conta=44
Industry* Brewers
Bovespa Ticker AMBV3, AMBV4
EBI Rating 5 Stars