BlackRock Buys Dip in Brazil, Joined by GIC and Lemann-Tied Fund

(Bloomberg) -- BlackRock Inc. is among funds and tycoons buying cheap stocks in Latin America’s largest economy.

The global investment firm boosted its holdings in four Brazil-based companies above 5% last month, according to a review of more than 40 corporate filings. Singapore’s sovereign wealth fund GIC, Banco Bradesco SA and a fund backed by billionaire Jorge Paulo Lemann also got in on the action with relevant stakes in other stocks since late February.

As indices around the world show signs of stabilizing, some investors and money managers are wading back in to battered markets like Brazil. With a 53% plunge, the nation’s Ibovespa is the worst performer among major global guages this year in dollar terms. But with dip-buyers still far and few between and Wall Street strategists largely bearish on emerging markets, there’s clearly a trend toward caution.

“The truth is, stocks are so cheap it’s like shooting fish in a barrel,” said Bruno Garcia, the chief investment officer at Truxt Investimentos in Rio de Janeiro. “The trick is to find the ones that won’t go bust.”

Ed Kuczma, who oversees BlackRock’s Latin American equity funds, said he and his team have been talking to a number of companies that are positioning themselves to come out of the coronavirus crisis as a stronger competitor.

“Multiple bargains are emerging,” Kuczma said. The firm has been putting money to work in sectors including financial, consumer discretionary and real estate. “We are confident that Brazilian equities are likely to benefit from a sustained easing of volatility.”

Some of BlackRock’s recently increased Brazilian bets include the utility known as Taesa; Cia. Brasileira de Distribuicao, which operates Pao de Acucar supermarkets; Notre Dame Intermedica Participacoes SA; Qualicorp Consultoria & Corretora de Seguros SA and auto-parts maker Iochpe Maxion SA, according to regulatory filings.

BlackRock doesn’t comment on specific stocks. And while Brazilian law requires companies to disclose any stakeholders owning 5% or more, they don’t always say how many shares were purchased or if the buyer held a prior stake.

Singapore’s sovereign wealth fund GIC, meanwhile, acquired a relevant stake in web-services provider Locaweb Servicos de Internet SA. Local firm Tarpon Asset Management boosted its stake in silo manufacturer Kepler Weber SA. And Bradesco, Latin America’s second-biggest lender, raised its interest in medical diagnostic firm Fleury SA through an insurance unit.

Brazil’s corporate tycoons are also taking advantage of recent tumbles to buy stocks. The Molina family, which founded meat giant Marfrig Global Foods SA more than 20 years ago, upped its holding to 45%.

To be sure, while the buying spree is a good sign that some shares may have been oversold, uncertainty remains and many of the stocks flagged in the review of regulatory filings have since lost value. What’s more, top investors and strategists, from Goldman Sachs Group Inc. to JPMorgan Chase & Co. and Franklin Templeton, are telling clients to hold off on bargain hunting in emerging markets. They’re worried the coronavirus could devastate nations from India to Brazil, where infections are only now starting to gather pace.

Credit Suisse-backed hedge fund Verde Asset Management became a cautionary tale for buying the dip too soon. But while the firm acknowledged its mistake in a letter to clients in March, it said it’s still snapping up shares in the U.S. at a thrifty pace. In Brazil, recent bets included clothing retailer Cia. Hering. Verde declined to comment on specific positions.

Florian Bartunek, a veteran stock picker at Constellation Investimentos & Participacoes, which is backed by Lemann, said his strategy is focusing on names that are undisputed leaders in their sectors. Constellation bought shares of software maker Totvs SA, according to one filing.

“If you’re looking to scoop up shares of exotic companies just because they are very cheap, there’s a greater chance you’ll make a mistake,” Bartunek said during a live broadcast hosted by Banco BTG Pactual last week. “I’d focus on the obvious firms.”

©2020 Bloomberg L.P.