Sell on the news isn’t limited to the U.S. markets.
The preferred shares of Banco Bradesco (BBD), the second largest bank in Brazil by market cap, dropped 4% on October 27 in Brazil and the ADR fell 5.3% in New York after the company reported a 40% increase in adjusted profit that still fell short of analyst estimates
The difference between actual results of 2.52 billion reais (the plural for Brazil’s real) and analyst estimates of 2.55 billion reais came down to an 18% increase in expenses and weaker than expected loan growth.
The higher expenses came as the bank expanded its customer service network and increased advertising. Loan growth came to 4.2% from the previous quarter. Outstanding credit climbed 20% in September to a record and Banco Bradesco saw its loan portfolio expand by 19% from the same quarter in 2009.
Perhaps most important to investors still counting the bad loans at banks around the world, the average default rate fell to 3.8% at the end of September from 4% in the second quarter and 5% in September 2009.
The stock rebounded from its drop today, November 1, but I think there’s a good chance that you’ll get another opportunity near the October 27 price or lower on volatility in emerging market shares. I’d wait for a chance to buy at $20 a share. In the meantime, I’m putting the stock on my watch list https://jubakpicks.com/watch-list/ .
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund (JUBAX), may or may not now own positions in any stock mentioned in this post. As of the end of the September 2010 quarter, the fund owned shares of Banco Bradesco. You should not assume that the fund still owns a position in that stock. For a full list of the stocks in the fund as of the end of the most recent quarter see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
rickbudzy, That is a complete list of the fund’s stock holdings. The rest was in cash.
Thanks Jim! I agree that banking is a good sector in Brazil and will be looking for a good entry. I already own PBR and CPL, so I have some Brazil exposure already.
rickbudzy – did you account for cash as the percentage for each stock is the percentage of the fund not of the stocks in the fund.
Jim:
You either need to correct the disclaimer “a full list of the stocks of the fund” or post all of the stocks in the fund. When I add up the percentages of the stocks in the fund, it does not equal 100%.
I wouldn’t say BBD is better thsn ITUB. At the moment BBF has a lower bad loan reserve percentage and ITUB has to shape up Unibanco, not a very good bank, after the merger with what was then Banco Itau. But I think the long term story in Brazil–falling interest rates create room for a nbew generation of financial products (Brazil saw its first 30-year mortgage ever in the last 12 months thanks to falling rates snd falling inflation–is so good you should own both
The U.S. traded BBD ADR is based on the preferred shares
Off Topic: SEC investigating JPM: http://www.propublica.org/article/sec-investigating-deal-between-jpmorgan-and-hedge-fund-magnetar
yakalot,
ticker BBDC4 (Sao Paulo Stock Exchange)
I can’t find Bradesco’s preferred shares. Does anyone know the ticker? Exchange?
Jim… I have been watching ITUB and missed an entry point. Is BBD better? If so, why? Thanks!