The 2014 All-Brazil Research Team: Retailing, No. 1: Fábio Monteiro

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Fábio Monteiro BTG Pactual First-place appearances: 2

Total appearances: 6

Team debut: 2009 BTG Pactual analyst Fábio Monteiro earned first place in Consumer Goods last year and now wins the top spot in Retailing, which together with Food & Beverages replaces that former category. The 38-year-old analyst works out of São Paulo and reports on 18 stocks. He is cautious on the wider group. “In our view the main macro drivers affecting consumer confidence — for example, unemployment, disposable income and credit availability for consumer finance — aren’t improving at the margin,” he explains, “and inflation will likely impact disposable income even more in the next 12 months.” At the company level, adds Monteiro, execution has been mediocre, on average, and valuations are rich by historical standards. Moreover, “earnings growth in 2014 could be decent, due to the very weak figures in 2013,” he notes, “but most of the growth is already priced in.” Even so, in January the analyst alerted investors to buying opportunities in Rio de Janeiro–based multiline chain operator Lojas Americanas and department store retailer Magazine Luiza, which is headquartered in São Paulo. He reminded investors that Lojas Americanas remained among his top picks because it represented “a unique investment case,” Monteiro says, “combining sustainable growth with relatively low risk, marginal [return-on-invested-capital] expansion, outstanding execution, and a defensive and flexible product mix.” At the same time, he upgraded Luiza as a short- to midterm buy, advising clients that the retailer “continues to enjoy great relative sales momentum,” he recalls, thanks to tax concessions for smartphones made in Brazil and robust television sales ahead of the 2014 World Cup. In addition, improved margins, expenses and consumer finance numbers “are the icing on the cake, taking [Luiza’s] net profit to the next level,” explains Monteiro. By the end of July, Lojas Americanas’ stock had jumped 11.7 percent, to 11.89 reais, while Magazine Luiza’s leaped 13.9 percent, to 8.95 reais. During the same period, the sector gained 9.2 percent.

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