Click here to see the ranking.
A growing corruption scandal may have left Brazil’s government shaky, but its vibrant economy and strengthening currency continue to attract investors. Propelled by booming exports and accelerating consumer demand, Brazil’s real average annualized GDP grew 4.9 percent in 2004, up from 0.5 percent in 2003; it’s expected to grow by 3.3 percent this year, according to the Institute of International Finance, an association of the world’s largest banks. The result: record-high trade and current-account surpluses and strong appreciation of the Brazilian real against the dollar -- 13.3 percent in 2005 through mid-August, to 2.342 reais to the dollar. For foreign investors, anyway, that helped boost the stock market’s 4.7 percent gain for the same period. The Bolsa de Valores de São Paulo, or Bovespa, index rose 17.8 percent in 2004.
With the Brazilian market attracting investor interest, skilled analysis is in demand. And no firm is more praised for its efforts than Credit Suisse First Boston, which captures first place in Institutional Investor ‘s All-Brazil Research Team for a second year in a row, with eight team positions. UBS, last year’s No. 2 winner, ties for the second spot with Banco Pactual, which moves up from fourth place. Each has six team positions. Itaú Corretora de Valores, down one notch to fourth place, with five positions, is followed by Merrill Lynch and Santander Investment Securities, which once more tie for fifth, with four positions each.
To determine the winners, II polled portfolio managers and analysts at dozens of institutions that together own more than $47 billion in Brazilian equities, representing almost 29 percent of Bovespa free float, and more than $38 billion in Brazilian debt. In this year’s survey, our second, we cover eight equity-related industry categories and two macro disciplines. We expanded the category of Capital Goods/Diversified Industrials into Aerospace, Transportation & Industrials and added a category for Small-Cap Companies.
Researchers in all categories are finding themselves pressed for results by at least one group of investors: hedge funds. “It’s not enough to write good maintenance reports and provide service; you have to get the stocks right,” says Marcelo Kayath, head of Latin American research at CSFB and No. 3 in Equity Strategy. He notes that hedge funds don’t reward analysts for service; they vote for performance. CSFB’s five first-teamers this year generated several money-making ideas, including Telecommunications Services winner Andrew Campbell’s call on the takeover of cell phone operator Tim Sul; Banking & Financial Services analyst Roberto Attuch’s early notice of Banco Bradesco’s potential; and Emerson Leite’s bullishness on Petróleo Brasileiro, or Petrobrás, in the Chemicals & Oil sector.
To serve hedge funds, analysts have started to add short-term trading calls to their report output. Unibanco now offers a section in its daily resesarch product on short-term arbitrage opportunities geared to hedge fund clients, says research director Sérgio Goldman. Marcelo Mesquita, the top-ranked Equity Strategy analyst who heads Brazilian research at UBS, asserts that the demand has led to his firm’s producing “more sophisticated products and analysis.” Eduardo Sancovsky, Itaú Corretora’s head of sales, who passed his firm’s research director’s baton to Marcos Lanfranchi de Callis in July, says that analysts “now have to produce more-detailed and more-frequent work.”
Additional demands on analysts’ time are coming from traditional institutional investors that previously did not cover Brazil. “One big U.S. mutual fund company used to send two or three Latin America managers and analysts,” says UBS’s Mesquita. “Now they come with ten people, including European consumer analysts and Asian basic materials analysts, seeking greater understanding of how Brazilian companies interact in global industries. A lot of European analysts are demanding information from Brazil.” Other institutions are folding their Latin American coverage into global emerging markets and are looking to the sell side to fill the research gaps, says Itaú's Sancovsky.
The fertile market environment of the past year and a half has fostered the rebirth of the initial public offering market; recently, IPOs have been proceeding at a pace of about one per month. Among the notable debuts: Renar Maçãs, an apple grower and processor; Submarino, an Internet retailer; and Localiza Rent A Car. Tam Brazilian Airlines, Brazil’s biggest domestic carrier, went public in June; that same month J.C. Penney Co. announced it would sell Brazilian retailer Lojas Renner to the public. In July utility Energias do Brasil, a unit of EDP (Energias de Portugal), and toll-road operator Obrascón Huarte Laín went public. Media conglomerate Grupo Folha and Magazine Luiza, a chain of household goods stores, also have announced plans for IPOs. In addition to investor receptivity to new issues, “it is natural for the buy side to start looking at second- and third-tier companies at this point in the market cycle,” says Santander research chief Patrick Boucher, explaining the growing interest in small-cap stocks.
To meet investor demand for information and analysis, banks that have had a small presence in Brazil are ramping up their staffs. Some without a Brazil office are looking to open or acquire one, says Fletcher Kosut, a recruiter at Westport, Connecticutbased Emerging Globe Group who places investment bankers and analysts at Brazilian securities firms. “Brazil is on the radar screen of all the major banks,” he says. But finding sufficient numbers of talented analysts is no easy job. With hedge funds siphoning Brazilian researchers from the sell side, as they are doing around the world, “it’s been a challenge to find people,” says Santander’s Boucher. Compounding the demand is a shortage of up-and-coming analysts. During 2000'02, when securities markets in Brazil were depressed, investment houses reduced staff or shuttered their research departments entirely, explains Carlos Firetti, Bradesco Corretora’s research chief. “Because of that not too many analysts were being groomed; we’re missing a new generation.” Firetti says that the dearth of experienced analysts has created a bidding war for successful researchers among firms. Foreign banks, which can pay more than the locals, have an edge, he says. Firetti tries to hire analysts from the buy side, from industry and from nonresearch areas of firms. “Local players are becoming more aggressive with compensation to compete with international players,” he says.
Because of the demand, compensation has spiked sharply in the past 18 months, Kosut says. He estimates that a premier analyst at a top-tier bank in Brazil will earn between $200,000 and $250,000 in total compensation this year, whereas an analyst at a local bank will earn between $150,000 and $175,000. “But the cost of living in Brazil is such that making $200,000 in São Paulo is better than making $400,000 in New York,” he notes.
“In 2002'03 everybody got paid down,” adds Rowe Michels, Latin America research director at Bear, Stearns & Co. “But total compensation has risen over the past couple of years. It’s partial ‘compensation recovery.’”
Structuring the research effort is as much of a challenge for the sell side as is compensation. Eleven of CSFB’s analysts are based in São Paulo and six in Mexico City, where they cover Mexican and Brazilian stocks. In the past year the firm has added one analyst to cover small-cap stocks and one assistant in the consumer area. “You can only add value if you’re close to where the action is,” says CSFB’s Kayath. “I can get a lot from going to lunch and seeing who is eating with whom.”
Currently, UBS has eight analysts based in Rio de Janeiro; Mesquita says he may add researchers if the new-issues market stays strong and the number of stocks continues to grow. In addition, five analysts based in New York cover some Brazilian companies as part of regional sector coverage, he says.
Unibanco has maintained its analyst head count at 11 (five senior and six junior researchers) based in São Paulo, says Goldman, but like other Brazilian research departments, Unibanco has increased the number of companies covered as more stocks have come to market and investors want more small-cap research. In the past year, Unibanco has added ten new stocks to its coverage list, six of which are small caps that are being followed by the junior analysts within each sector team.
Santander bases its Brazilian beverages and banks analysts in New York (where they do regional coverage) and its seven remaining analysts in São Paulo. Four senior analysts, each with an assistant and an intern, were added in the past year. “We’ve had to be a lot more creative in where we find them,” in many cases looking to industry to hire candidates the firm will train as analysts, says Boucher. He believes that going that route allows Santander to provide better insights and service and differentiate itself from the competition.
“There is an increasing demand for more-detailed technical and fundamental research,” says Ricardo Kobayashi, research director at Banco Pactual and the second-team equity strategist. “We’re hiring and increasing our analyst base.” Kobayashi has hired four junior analysts and two intermediate-level researchers over the past year, bringing his team to five senior analysts, five intermediate analysts and four juniors. He says Pactual is unique in that its research effort was launched 12 years ago to serve foreign clients rather than domestic ones; it began to develop its domestic clientele five years ago.
Bradesco’s Firetti wants to hire two more analysts to complement the four currently on the team. “We want to be able to compete in the IPO market,” he says. “It’s difficult to compete with the global players, but we have local flavor and broader coverage.”
At Bear Stearns coverage is regional, not country-specific, says Michels, noting that the firm has a four-analyst office in Brazil focusing on economics and strategy, while the bulk of the team consists of eight New Yorkbased sector analysts. “Our idea is that we want to hire the best analysts available -- no matter where they’re located,” he says. As global trade barriers fall, Michels adds, the real value added comes from researchers with a broad understanding of how businesses work across geographic barriers. “Plus, we find that senior political and company officials are much more likely to take a meeting with someone who’s flown in from New York than with someone who walked across the street.”
INDUSTRIES
AEROSPACE, TRANSPORTATION & INDUSTRIALS
Rodrigo Goes UBS
SECOND TEAM Daniela Bretthauer Santander
THIRD TEAM Carlos Albano Unibanco
In a new category that reflects the Brazilian airline industry’s recent dynamism, Rodrigo Goes of UBS earns first-team status based on the clarity of his investment models and his thoroughness in educating investors about Gol Linhas Aéreas Inteligentes before its June 2004 initial public offering. Unable to participate in road shows because his firm co-managed the deal, Goes explained the discount carrier’s financials to potential investors in Brazil, the U.S. and Europe. Despite all his effort, Goes admits that he was “effectively wrong on the stock” for quite some time, having been neutral from its IPO at $17 until mid-April, when he issued a strong buy at $28.05. The American depositary receipts were at $35 in mid-August. Still, one client says the 32-year-old New Yorkbased analyst answers all his questions “effectively.” Goes, a chartered financial analyst with a master’s degree in science and engineering from the University of Michigan, started in the technology research group at CSFB in 1999 and joined UBS two and a half years ago. Clients applaud São Paulobased second-team winner Daniela Bretthauer of Santander (also a third-teamer in Consumer Goods) for her access to management at both Gol and Tam Brazilian Airlines, as well as for her independence. She thought Tam’s initial offering price of R18 in June was “a little bit stretched,” says one client, noting that her opinion highlighted negatives as well as positives and “was different from the other book runners’.” São Paulobased third-teamer Carlos Albano of Unibanco also covers airlines, but clients cite him for his work on Cia. de Concessões Rodoviárias, a toll-road operator that went public in January 2002. By mid-August its stock had scored an impressive 70.5 percent gain over the previous 12 months, from R32.38 to R55.20.
BANKING & FINANCIAL SERVICES
Roberto Attuch CSFB
SECOND TEAM Bruno Pereira UBS
THIRD TEAM Tomás Awad Itaú Corretora
Roberto Attuch of CSFB, who scores first-place honors for a second straight year, is widely credited as the first analyst to note the potential of Brazil’s biggest private bank after it had digested several acquisitions. The 36-year-old São Paulobased analyst made his outperform call on Banco Bradesco at a split-adjusted R36.0 in late 2003; bottom-line improvements arrived in the fourth quarter of 2004, when annualized return on equity jumped to 31.7 percent from 23.3 percent in the previous quarter. This year ROE rose to 34.7 percent in the first quarter and 38.1 percent in the second. Following suit, Bradesco’s stock soared 164.4 percent after Attuch’s call, to R95.2 in mid-August. Bruno Pereira of UBS in Rio de Janeiro, who wins second-team honors again this year, issued a buy on Bradesco in early June 2004, at R41.3, and downgraded it to neutral in mid-February, at R77.55, explaining, “We felt it could pause for a breath.” Says one fan, “I’ve read Bruno’s reports for a long time, and he’s always the best for me.” Since early June, when he issued a buy at R13.60, Pereira has been bullish on Unibanco, Brazil’s third-largest private bank, which he had underweighted beginning in 2003 because other banks looked better to him. It closed at R15.11 in mid-August. Returning third-teamer Tomás Awad of Itaú Corretora also was bullish on Bradesco, issuing a buy in mid-March at R81.7. Through mid-August the stock had outperformed the Bovespa index by 20.5 percentage points. One client, who notes that not being able to cover Banco Itaú puts São Paulobased Awad at a disadvantage, says, “He has very good knowledge about the sector; he’s a good analyst to consult.”
CHEMICALS & OIL
Emerson Leite CSFB
SECOND TEAM Gilberto Pereira de Souza Itaú Corretora
THIRD TEAM Daniela Guanabara Banco Pactual
RUNNERS-UP Christian Audi Morgan Stanley ; Frank McGann Merrill Lynch
Repeating in first place for a second consecutive year, Emerson Leite of CSFB has been a bull on Petrobrás since mid-2002 and was the first to set a target above $50, in June 2004, when the ADRs were at $25. Petrobrás reached $59.68 in mid-August, and Leite is targeting a price of $67 by year-end. “It may take some time, but ultimately, Petrobrás always benefits from higher oil prices,” says the analyst, who thinks the company is transforming its business and its production base. A client says that the São Paulobased Leite, 31, “has a very good quantitative background and is very smart.” Gilberto Pereira de Souza of Itaú Corretora, says one client, is “one of the few people able to explain all the changes in petrochemicals.” The repeating second-place finisher, who also is based in São Paulo, says the sector is recovering from a slowdown in Chinese demand and a 30 percent drop in petrochemicals prices early in the year. After two years of triple-digit gains, Braskem, Brazil’s biggest petrochemicals producer and one of de Souza’s top picks, saw its stock decline 20 percent this year through mid-August, to R17.50, but the analyst believes it can hit his target of R35 by year-end. Third-team finisher Daniela Guanabara of Banco Pactual, praised by clients for “anticipating trends in petrochemicals,” also tabs Braskem as her No. 1 recommendation, even after lowering its price target from R41 to R31 in mid-July. A long-term bull, the Rio de Janeirobased newcomer believes 2005 will be a “tougher year” in petrochemicals.
CONSUMER GOODS
Tania Sztamfater Unibanco
SECOND TEAM Juliana Rozenbaum Deutsche Ixe
THIRD TEAM Daniela Bretthauer Santander
RUNNERS-UP Gustavo Hungria Banco Pactual ; Tufic Salem CSFB
Newcomer Tania Sztamfater of Unibanco wins first place and wide investor praise for a scoop on Brazil’s biggest discounter, Lojas Americanas. Sztamfater discovered revealing data buried in a newspaper article about an online subsidiary and issued a bullish call in mid-May. One satisfied investor says he has “never seen such a good report,” which provided insights into the company’s balance sheet. Year-to-date through mid-August, the stock was up 12.2 percent, from R49 to R55. An engineering graduate of Escola Politécnica da Universidade de São Paulo, Sztamfater, 28, joined Unibanco in that city in August 2004 after three years in M&A at J.P. Morgan and a year and a half as chief operating officer of a nonprofit group that encourages entrepreneurship. Second-team winner Juliana Rozenbaum joined Deutsche Ixe in September 2004 from Itaú Corretora, where she won first-place honors last year. She is cited by clients for her advice to hold off on Submarino, saying that the Internet retailer, known as the Amazon.com of Brazil, was too expensive at its IPO price of R21.62 on March 30. She was right. The stock sank to R14.80 in mid-May before rebounding to R23.50 by mid-August. Even while out on maternity leave, the São Paulobased Rozenbaum remained “very accessible,” raves one client. Repeating in third place, Daniela Bretthauer of Santander -- also a second-teamer in Aerospace, Transportation & Industrials -- decided to wait out Submarino’s IPO as well. Bretthauer, based in São Paulo, started recommending the shares in late May at R17 because, she says, “Submarino’s performance was in line” with her estimates by then, and she felt more comfortable with its valuation.
ELECTRIC & OTHER UTILITIES
Gustavo Gattass UBS
SECOND TEAM Pedro Batista Banco Pactual
THIRD TEAM Subhojit Daripa Santander
RUNNERS-UP Emerson Leite CSFB ; Rowe Michels Bear Stearns
When electricity prices unexpectedly plummeted in the wake of deregulatory auctions last December, many utilities investors were surprised. But not those who had been listening to UBS first-teamer Gustavo Gattass . Concerned about excess capacity, last year’s No. 2 analyst had seen the derailment coming and in late November downgraded the 52 percent-government-owned Centrais Elétricas Brasileiras, or Electrobrás, from cautious to reduce at R43.29. In late January, at R32.15, he upgraded the shares to neutral. In mid-August the price was R30.69. “I thought he was being overly cautious on the auctions but followed his call anyway, and it has really paid off,” says one grateful buy-sider of the seven-year UBS veteran. Gattas, 30, is a 1997 economics graduate of the Pontifícia Universidade Católica do Rio de Janeiro, where he is based. One admiring client says that Banco Pactual’s Rio de Janeirobased Pedro Batista , who slips from first to second team, “keeps me updated on the regulatory environment in the crazy Brazilian electricity sector and has excellent access to management and government officials.” Batista’s early-November 2004 buy on CPFL Energia, at R15.8, came two months after Brazil’s biggest private electric utility had its IPO at 16.75. After Batista’s call the stock rose 42 percent, to R22.50, through mid-August. Just as debuting third-teamer Subhojit Daripa of Santander forecast, rationing and regulatory worries caused water utility Cia. de Saneamento Básico do Estado de São Paulo, or Sabesp, to underperform the Bovespa index in 2004 by 21 percentage points. But before a share offering on October 29, the São Paulobased Daripa upgraded Sabesp’s ADRs to a buy at a split-adjusted $9.54 because sales were recovering and the utility had reduced its dollar-denominated debt. In mid-August the stock closed at $16.30.
NATURAL RESOURCES
Luiz Mann CSFB
SECOND TEAM Paolo Di Sora Deutsche Ixe
THIRD TEAM Marcelo Aguiar Merrill Lynch
RUNNER-UP Edmo Chagas UBS
After just one year covering natural resources, Luiz Mann , 32, debuts in the top spot. One investor praises the CSFB analyst’s April 2004 report for being the first to point out the domestic steel sector’s high growth potential and for predicting that steel producer Usiminas, then at R26.05, would raise prices. The stock reached an all-time high of R61.10 in early March, just before the market turned down. Usiminas closed at R45 in mid-August. In March, Mann raised his target on the ADRs of mining giant Cia. Vale do Rio Doce to $45 from $35, convinced that iron ore prices would remain high. The stock has remained stable despite the market downturn, closing at $34.67 in mid-August, and he is sticking to his target. Mann, a graduate of the Universidade de São Paulo, worked at JGP Hedge Fund and at UBS in São Paulo before joining CSFB. He left the firm in early July for M. Safra & Co., the money management arm of the Safra Group. Taking the No. 2 spot is Paolo Di Sora , who joined Deutsche Ixe in August 2004 but who has since returned to Itaú Corretora, where he was top-ranked last year. In April, when many steel stocks began sliding from their early-year highs, the São Paulo-based Di Sora advised clients to reduce their steel holdings; the stocks fell about 25 percent through May, compared with a decline in the Bovespa index of about 8 percent. One client says that when he gets something from third-teamer Marcelo Aguiar at Merrill Lynch in São Paulo, “I know it’s important.” In January, Aguiar, a runner-up last year, and colleague Andrea Weinberg in New York noted sales of higher-margin products at Cia. Siderúrgica Nacional. In a weak first half for steelmakers, the company lost just 7 percent of its value, compared with Usiminas, which fell 19.5 percent.
SMALL-CAP COMPANIES
Renata Faber Itaú Corretora
In taking home the honors in this debut sector, Renata Faber sits at the center of a market segment that is vital to local investors and increasingly important to foreign ones. So far this year five companies -- as many as in 2004 -- have listed on the Bovespa’s Novo Mercado. The new exchange, which has corporate disclosure and governance requirements that are in line with the world’s major markets’, was created to help small, growing companies gain access to capital. One client notes that with small caps, standing out often is a matter of covering what others do not, and Faber does just that, following seven companies and planning to add two before the end of this year and three in the first half of 2006. “We need more Renatas to help us with small-cap stock picking,” notes one client. A graduate of Fundação Getulio Vargas management school in São Paulo, Faber, 25, joined Itaú Corretora in March from Fator Corretora, where she followed small caps for five years. At Itaú she initiated coverage of several small manufacturing companies, including Confab Industrial, Duratex, Fras-Le, Indústrias Romi, Iochpe-Maxion, Marcopolo and Randon. One client gives the São Paulobased researcher high marks for her in-depth knowledge of Confab, noting that the wide-diameter-pipe maker has provided him with a way to invest in Brazil’s natural-gas sector indirectly. At Fator, Faber advised investors to get into Confab at R1.1 in May 2004, and she reiterated her buy this May, at R2.7. As of mid-August, Confab shares had risen to R3.38. Also at Fator, Faber initiated a buy on Iochpe-Maxion, a train car manufacturer, in January 2004, at R5. The stock, which was at R13.01 at the end of July when Faber set a target of R22.7, had slipped to R11 by mid-August. (No analyst garnered sufficient support to merit a second- or third-place team.)
TELECOMMUNICATIONS SERVICES
Andrew Campbell CSFB
SECOND TEAM Ricardo Araújo Silva Itaú Corretora
THIRD TEAM Carlos Sequeira UBS
RUNNERS-UP André Baggio J.P. Morgan ; Carlos Constantini Deutsche Ixe ; Márcio Correia Banco Pactual ; Maurício Fernandes Merrill Lynch
Cautious calls by CSFB’s Andrew Campbell , ranked No. 1 for a second consecutive year, “were right on the money,” says one client. The 35-year-old American, who is based in São Paulo, stayed wary of Telesp Celular Participações, Brazil’s No. 1 mobile operator, which was down 36 percent in 2005 through mid-August. His pick of Tim Sul as a consolidation play was vindicated when the cell phone operator was acquired this spring by rival Tim Participações, which also acquired Tim Nordeste Telecomunicações. Second-teamer Ricardo Araújo Silva of Itaú Corretora, who moves up one position, called it right twice on Net Serviços de Comunicação, Brazil’s biggest cable TV operator. He initiated coverage with a sell on NSC’s ADRs in July 2004, at a split-adjusted $1.63; the stock fell to $1.25 in October. It rebounded to $1.71 in December, at which point he upgraded to a buy, which surprised many investors because the company was in default. But São Paulobased Silva said the stock was a bargain, and in mid-August it was at $3.11, a gain of 81.9 percent. UBS analyst Carlos Sequeira ‘s upgrade of the ADRs of Telemig Celular Participações to a buy in mid-January 2005, at $25.30, and a reinforcement on April 1, earn the Rio de Janeirobased newcomer a third-team ranking. By mid-August ADRs of the cell phone company, the biggest in the state of Minas Gerais, were up 22.3 percent, to $30.93. “Sequeira’s fundamental research and knowledge of the sector are unmatched,” says a client.
MACRO SECTORS
ECONOMICS
Nilson Teixeira CSFB
SECOND TEAM André Loes Santander
THIRD TEAM Guilherme Bacha de Almeida Banco Pactual
The early-year consensus that Brazil’s trade surplus would decline to roughly $25 billion for 2005 was too conservative for CSFB first-teamer Nilson Teixeira , who predicts the surplus will reach $38 billion, up from $33.7 billion in 2004. So far the numbers are trending in his direction, as is real GDP growth, which he forecast will ease from last year’s 4.9 percent average annualized rate to an annualized 3.4 percent for 2005. The São Paulobased economist, unranked last year, also predicts that consumer prices will rise in line with the government’s targeted rate of inflation: 4.5 percent for 2006 and 2007. Teixeira, 43, received a master’s degree in economics from the Pontifícia Universidade Católica do Rio de Janeiro and a Ph.D. in economics from the University of Pennsylvania; he has headed CSFB’s economics department in Brazil since 2000. “His reports are astonishingly complete and very fast,” says one client, who likes Teixeira’s daily and weekly products. Another says, “He is a solid adviser with wide-reaching, sure-footed calls.” Returning second-teamer André Loes of Santander forecast in March that the Banco Central do Brasil would stop raising rates in April, two months before the tightening actually ended. The call changed the São Paulobased analyst’s reputation for being consistently pessimistic. Investors say his prediction of a strengthening Brazilian currency set him apart from the pack, as did his assertion that individual credit would expand strongly. “Loes pays attention to detail and nuance,” says one investor. Dropping from No. 1 to No. 3 is Rio de Janeirobased Guilherme Bacha de Almeida of Banco Pactual, whose monthly calls correctly anticipated decisions at nine of 11 central bank meetings held to determine interest rates between September and July. “In November he predicted that monetary policy in the first half would be tighter than market consensus, and he was right,” says a pleased customer.
EQUITY STRATEGY
Marcelo Mesquita UBS
SECOND TEAM Ricardo Kobayashi Banco Pactual
THIRD TEAM Marcelo Kayath CSFB
RUNNERS-UP Tomás Awad Itaú Corretora ; Pedro Martins Merrill Lynch
Taking the top slot for a second consecutive year, 35-year-old Marcelo Mesquita of UBS saw his recommended portfolio climb 14.38 percent in local-currency terms over the first half of 2005, versus a decline of 4.37 percent for the Bovespa index over the same period. “He is consistently correct and a very solid adviser,” says one client of the Rio de Janeirobased strategist. Another states, “I trust him because of his consistency and the breadth of his knowledge.” Ricardo Kobayashi of Banco Pactual, who is also based in Rio, returns to his second-team position, presenting what one buy-sider calls “a differentiated overall view of the Brazilian market that is hard to find in his competitors.” In late September 2004, Kobayashi recommended underweighting fixed-line and mobile telecom stocks. Through mid-August telecoms underperformed Brazilian equities as a whole by 18.0 percentage points. Kobayashi’s overweighting of the banking sector during the same period also proved prescient: Bank shares outperformed the Bovespa index by 33.8 percentage points through mid-August and were the best-performing sector for that period. No. 3 Marcelo Kayath of CSFB is a newcomer to the team. The São Paulobased contrarian predicted a strong rally in steels in mid-2004. Despite a 34 percent drop between March and July, the ADRs of his top pick, Cia. Siderúrgica Nacional, rose 86 percent from his call through mid-August. In the banking sector, Kayath’s pick of Banco Bradesco in early December produced an 83 percent gain through mid-August, compared with a 24 percent increase in the Bovespa for the same period. “Kayath seems to have a knack for culling winners from an otherwise unattractive mix,” says one client.
