Are power distribution companies the great bargains in the market?

After reading the recent COELCE analysis in Ação e Reação, I have a feeling that in the coming months we'll see the kinds of comments on the media we saw about Cielo and Redecard: "Market overreacted", "Analysts now optimistic", "Great discount caused by excessive pessimism", "Buy" Buy" Buy!".

The price metrics of Eletropaulo and Coelce are so cheap...
It means that Mr.Market is seriously afraid about the regulatory issues.
As he usually overreacts, and the metrics are so cheap, I think it's very reasonable to think that Coelce and Eletropaulo are bargains.

It's just the beginning

Valor Econômico: Grande banco dá crédito via fundo

We're watching the beginning of the use of "financial innovations" in Brazil. Those shenanigans are increasing the leverage of the financial system in a moment of great credit expansion.

Another danger (opportunity!): A very large part of the funding for the credit given in Brazil comes from abroad. If the international markets dry, something bad (great!) is going to happen here.

I hope I have suficient ammunition when the great crash arrives. I'm stuffing the barn and waiting...

GEPA3 - Geração Paranapanema

Although with a high P/E, depreciation is very huge and investments low, wich gives a FCF yield of 11%.
All the concessions are due after 2029.
May be a good option, but more study is necessary.

Paying for Growth

An interesting article published today about B2W (BTOW3) shows that it's not a good idea paying for the hope of growth and/or for acquisitions. Also, it shows how a bad management can deteriorate a company.

How things work

CARD3 Yesterday: -7%

News Today: Fator says that the decision of the Superior Labor Court (TST) to reduce the workload of telemarketers from eight to six hours per day must have a limited impact on call center companies

CARD3 Today: +2%

Major Seller of CARD3 Today:

As simple as that.

Why bubbles exists?

This news shows that Skechers (a sneakers maker) promised to a public haunted by obesity to lose weight without ever setting foot in a gym. Launched in August 2009, called Shape Ups, allowed the Skechers to became the second best selling brand of tennis in the United States in 2010 with 9% market share, behind leaders Nike and Adidas ahead, owner of the brand Reebok .

It's not directly related to investing, but it illustrates how people can be persuaded by dumb things like that. Who can dare to expect that bubbles are not recurring?

Haven't you seen that before?

LinkedIn jumps 90% in debut on NYSE

Papers had already been priced at the top of the range estimated by the coordinators of the offer. That's really very good and we can expect that some things never change! 

Always can get worse:

LinkedIn soars 150%

CIEL3 - Cielo

Cielo could get even bigger and stronger.

Caixa quer ter pelo menos 10% da Cielo

BEEF3 - Minerva

Returning to the cash point, look how this shit likes to burn cash.
It doesn't pay any dividends, so where the cash goes to?
Are they investing so much? I can't believe.
I think that's one of the best Fundamentus Graph.
As the saying goes, who's likes to burn cash is crazy!

Bons ventos para dividendos

Valor Econômico: os papéis de empresas boas pagadoras de dividendos estão adquirindo ares de estrelas da bolsa

Desde abril de 2006, quando foi lançado, o portfólio (dividend stocks) acumula ganhos de 132,97%, ante 60,08% do Ibovespa.

Cash is king

Valor Econômico: Perda de caixa preocupa a indústria da construção

Now analysts realized that those companies consume more than generate cash.

Since 2008:
Profit: 8,5B
Cash generated: -20B

Small Caps - Nonsense

Com a bolsa em queda, garimpar boas small caps ficou mais difícil

Did you understand that? Or is that just nonsense?

Steel

Is there an oportunity in Steel?

Those companies (CSN, GOAU and USIM) are among the worst performing blue chips in the last 12 months. The sector is out of favor because of bad results.

But, even delivering about half the earnings show in past years, USIM5 is trading for a P/E ratio of 12,45. It's debt to equity ratio is of only 0,45. USIM also has a significant business in iron ore mining.

Forjas Taurus - FJTA4

Taurus faz reorganização societária

Now I think Taurus will start replying my emails.

Taurus will merge with Polimetal, its largest shareholder, and assume its debts (165 millions BRL).

Luiz Fernando Costa Estima, the owner of Polimetal, will give half his shares to the other shareholders and FJTA will go to governance level 2 (with 100% tag along).

Taurus will be able to use Polimetal's fiscal losses of about 220 millions BRL. It's worth about 70 millions (34%).

I don't know yet how many ON shares I will get from this deal.

BBAS3 - Banco do Brasil

Main numbers (1Q11 x 1Q10) that hold my attention at a glance:

Loan Portfolio: 21% (almost 20% of market share)
Income (recurrent): 2.9 bi, growth of 42%
Default Rate: 2.1% (versus 3.2% market)
Payout: should be maintained at 40%

New toxic inventions

BIS alerta para teor tóxico de certos tipos de ETF


Human criativity and sound finance just don't match.

AMBV3 - Ambev

Unlike DTEX, AMBV results were very good:


Net Revenue               10.5%
Gross Profit                11.3% 
EBITDA                     13.7%
Net Earnings               21.7%


That's a Company a la Buffet, with a high cash flow, but sadly not at an adequate price at the moment.                           

DTEX3 - Duratex

Main numbers (1Q11 x 1Q10) for Duratex, a company that worth keep an eye on:

Net Revenue               8.9%
Gross Profit                1.5%
EBITDA                   -3.0%

So it's was a very poor result, when its sector is in one of the best moments of all. Costs of goods sold and operational costs grew up more then revenue.
And besides that, current valuation are very high.
The best thing to do it's just wait!

That's the end

Geração Futuro troca Randon por OGX em carteira recomendada para maio

The Upside Down of Irrationality

You can see how crazy things can get in about 100 day trades of CIEL3...

CIEL x RDCD

RDCD has increased its market share and lost less MDR, increasing revenue from commissions in 7%. However, lost 20% in POS Rental and Net Financial Income was stable leading also to a quite stable total revenue. With costs and operating expenses growing, earnings dropped 20%.

CIEL lost market share and lost even more MDR, stagnating revenues from commissions. However, lost little in POS Rental and Net Financial Income increased impressive 75%, leading to a growth of 6% in total revenue. This growth offset cost and operating expenses growth, so earnings dropped only 4%.

So I think that again CIEL was better than RDCD.

Real Estates Funds

CSHG Logística FII
New release of HGLG11 explains its main assets. Worth note that now rents earned are taxed, but the process of transfers, so that the fund obtains direct ownership of the property is underway and as soon as them end, real estate revenues will be exempt.

CSHG Recebíveis Imobiliários BC FII
What you think about this fund?
It's currently yielding more than 10%.

Dangerous Level

An interesting graph that shows current prices levels related to historical context.
You can read the whole post at dshort.com.