Monday, December 20, 2010

Brasil Foods long

Brasil Foods S A is new company formed by Sadia and Perdigão. Peridigao is the second largest protein producer in Brazil and the tenth largest company in the country. Before running into trouble with currency derivative trades, Sadia was a very profitable protein exporter to 110 countries. The combination of the two companies joins to high growth entities in the Brazil domestic market and abroad.

The author sees tremendous upside in BRFS as Brazil expands and the global economy recovers. BRFS is the second largest exporter of meats in the world, and thus will benefit from even a muddling world economy.

The company sells at a 14B USD market cap, in line with 2009 sales. Yet the company reported in 3Q 2010 it is growing at an 8% rate and guided to grow at 10-12% in 2011 due to continuation of the global economic rebound.

Risks to this investment include a rise of the Brazilian Real or fall in the USD. Brazil is also tremendous exporter of commodities so economic deceleration in China or around the world could cause significant problems for BRFS.

But while the world is living on stimulus and papering over economic problems, I am long BRFS.

The author recommends buying BRFS at $15.8.


Lockstep said...

Since this is such a high quality company, I increased my purchase price and entered at $16.35 on Dec 26th. I am now long BRFS at $16.35.

Lockstep said...

Rumours exist, substantiated by a Portugese newspaper, that Buffett is investing in this company. No US publication confirmation on that.

Lockstep said...

BRFS has missed earnings two quarters in a row. Thus I am closing out my position on the stock at $17.84.


Great food stock