Top Brazil hedge fund picks Petrobras giant as next big bet
“The stock is cheap,” Joao Braga, XP Asset Management
XP increased Petrobras stake after diesel controversy
Fund says stock is cheap, looks to asset sales as driver
By Vinicius Andrade and Felipe Marques / Bloomberg
Petroleumworld 05 06 2019
One of Brazil's best-performing hedge funds has been scooping up the shares of state-controlled oil giant Petroleo Brasileiro SA .
Joao Braga and Marcos Peixoto, who manage 5 billion reais ($1.3 billion) at XP Asset Management, have increased their stake in Petrobras, as the company is known, making it the biggest holding of their XP Long Biased fund even as the oil producer's rally has outpaced the benchmark.
“The stock is cheap,” Braga said in an interview at XP's Sao Paulo offices. “Management is good, the company is deleveraging and there are the asset sales, which will be good for the company.”
XP's increased bet was made in the aftermath of a controversy about the company's diesel price policy. Shares fell as much as 8.7 percent the day after the government decided to halt a previously announced diesel price hike amid growing rumors of a new truckers' strike, an episode that stoked fears of state intervention.
A few days later, Petrobras announced it would carry out the increase, which was seen as an initial step to regain the market's confidence.
“In Brazil, we'll always have a risk this happens again,” Peixoto said. “We cannot say that this is a risk-free position.”
The company's asset-sale program will also help spruce up share prices, according to Braga. UBS estimates the company could raise between $15 billion and $20 billion by shedding assets, a process that might take up to 24 months to be concluded.
Fat to Burn
The duo also the company's multiples in relation to crude prices to support their thesis. They see Petrobras trading at less than four times enterprise value to earnings before interest, tax, depreciation and amortization at current oil levels, compared to six times historically.
“That means even if oil goes down, Petrobras doesn't have to go down, because it has a lot of fat to burn,” Braga said.
The XP Long Biased fund, which has outperformed 99 percent of its peers in the past 3 years, with a 153.6 percent total return, also has large holdings in Qualicorp SA and Cia de Saneamento do Parana shares.
We invite you to join us as a sponsor.
Circulated Videos, Articles, Opinions and Reports which carry your name and brand are used to target Entrepreneurs through our site, promoting your organization’s services. The opportunity is to insert in our stories pages short attention-grabbing videos, or to publish your own feature stories.
Vinicius Andrade and Felipe Marques from Bloomberg.
bloomberg.com/ 05 03 2019
Copyright© 1999-2019 Petroleumworld or respective author or news agency. All rights reserved.
We welcome the use of Petroleumworld™ (PW) stories by anyone provided it mentions Petroleumworld.com as the source.
Other stories you have to get authorization by its authors. Internet web links to http://www.petroleumworld.com are appreciated.
Petroleumworld welcomes your feedback and comments, share your thoughts on this article, your feedback is important to us!
We invite all our readers to share with us
their views and comments about this article.
Write to email@example.com
By using this link, you agree to allow PW
to publish your comments on our letters page.
Any question or suggestions,
please write to: firstname.lastname@example.org
Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels