Monday, March 17, 2008

Portfolio A1 Doubles Down on Brazil

As a five stock portfolio that has sector concentration rules built in but no country or regional rules, there are occasional instances in which Portfolio A1 inadvertently takes multiple positions in a concentrated geographical area. This week is one of those instances, as the portfolio is selling fertilizer producer Terra Industries (TRA) after the company triggered an automatic sell rule by dropping 20% from the high during its holding period.

In lieu of TRA, the portfolio is adding Brazilian pulp and paper producer Votorantim Celulose e Papel SA (VCP), an ADR which I will henceforth conveniently refer to by their ticker. In Brazil Rallies While China Struggles, I recently noted how the Brazilian ETF (EWZ) had reflected the country’s recent superior performance relative to the more widely discussed China ETF (FXI); for those looking for individual Brazilian equities, you may wish to add VCP to you watch list, as it looks like it may have pulled back to technical support. VCP joins Brazilian telecom standout Tele Norte Leste Participacoes SA (TNE); together these two companies will now comprise approximately 42% of the portfolio.

In spite of some recent weakness, Portfolio A1 still holds net performance advantage of 16% over the benchmark S&P 500 index, with a 4.5% cumulative gain vs. an 11.5% cumulative loss for the SPX.

There no other changes to the portfolio for the coming week.

A snapshot of Portfolio A1 is as follows:

2 comments:

Felix said...

If the Chinese economy is slowing, wouldn't there be a negative effect on Brazil and other Latin American economies? I'm no int'l economy expert, but my understanding was that at least part of the boom down south is due to purchases of commodities by the Chinese. If our economic slowdown is causing the FXI to fall, wouldn't there be a follow-on effect on the EWZ?

otoh, I guess we could consider the relative performance of the EWZ vs. the FXI as a gross measure of the pricing power that the raw materials producers have with respect to the raw materials consumers.... I'm on board with that thesis. :)

tnt

Anonymous said...

True, but if the commodity boom is going to slow, because of slowing economies, they would get hit too. Ill need to see what countries are performing well, if not moving up in the face of all this.

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