3 Stocks That Help Drive Brazilian Equity's Outperformance Over US Equity In 2023

U.S. equity may have soared to nice heights in 2023. Growth stocks, especially those belonging to the Tech sector, have been leading the way.

The market benchmark S&P 500 index tracking ETF — the SPDR S&P 500 ETF SPY — is up 23.22% for the year as we head towards the 2023 close.

There is, however, another ETF that has returned more to investors this year than the SPY.

The blue line above represents the iShares Inc iShares MSCI Brazil ETF EWZ. It returned 32.27% in the year so far; 9% over and above what investors got from putting their money into U.S. equity.

Let’s look at some stocks that helped drive this outperformance.

Petroleo Brasileiro SA Petrobras PBR: This Brazilian integrated oil and gas company’s stock is up 59% YTD. With its preferred shares, PBR stock commands over 15% of the EWZ portfolio. Petrobras has a market cap nearing $100 billion. The company is focused on rapid production growth and strong returns.

With a unique portfolio, it plans to spend over $100 billion over the next five years, growing production by double digits. Balance sheet issues have been resolved and the business is capable of providing significant returns for shareholders, mostly in the form of dividends.

Read: Crypto Exchange OKX Launches In Brazil, Targets Latin America’s Largest Market

Itau Unibanco Holding SA ADR ITUB: One of Brazil’s largest private banks, Itau Unibanco commands 7.82% of the EZ portfolio. The stock is up about 53% YTD. With a reported ROE of more than 21%, Itaú Unibanco’s financial performance demonstrates exceptional efficiency. The bank keeps its NPL levels steady at 3% and maintains strong asset quality.

It is anticipated that the departure from Itaú Argentina will not substantially affect 2023 profitability.

Banco do Brasil SA BB Brasil BDORY: This state-controlled bank in Brazil commands 2.61% of the EWZ portfolio. The stock is up over 75% YTD. The bank performs well, surpassing domestic counterparts with a 21.3% ROE.

The increase in delinquency rates and the quarter’s lower net profit growth have raised some mild concerns. The loan portfolio, however, grew significantly year over year.

Now Read: Growth Stocks Outpace Value By 10% As 2023 Nears End: Will The Trend Continue?

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