This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Petrobras and Vale: The Keys to Brazil's Growth

Editor's note: This was originally published on RealMoney . It is being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

As I mentioned in part one of this series, the economic growth story of Brazil starts with energy and minerals -- more specifically with Petrobras (PBR) and Vale (RIO). Any discussion of this former Portuguese colony is incomplete without acknowledging these titans of industry.

Brazil is blessed with an abundance of natural resources, ranging from oil to iron ore, and understands one important fact -- the world needs more energy and basic materials.

Am I stating the obvious? Yes, of course, but I am constantly amazed at how many companies don't share this same understanding of supply and demand (Exhibit A is ExxonMobil, in my opinion).

More important, these Brazilian conglomerates have become world-class institutions with the management foresight and financial savvy to monetize their resource bounty.

China Watch: Brazil's One Way In (Video)

One way to get in on the action with China is to play Brazilian companies with Chinese connections. Patrick Schultz reveals how we can play one emerging market to play another.

To watch the video, click the player below:

Plus, don't miss China Watch Mail Bag: Best Brazil Bets.

Vale is the foundation of the Brazilian mining and mineral commodity complex, and its upside story is basic and uncomplicated. It is the world's largest producer of iron ore and second-largest producer of nickel, with the largest nickel reserves in the world.

The company is expanding its coal production as well, aiming to double to 16 million tons over the next five years. Demand for iron ore and everything that Vale produces continues to surge. Without a doubt, China is primarily responsible for the demand, but I believe that expanding global growth will drive demand from other emerging markets (think Africa and East Europe) and domestically in Brazil.

As for the energy sector, if you want to get me excited, just say the word "Petrobras," sing the words "Tupi oil field," and I will be in investor heaven. But please forget about Chevron (CVX) and don't bore me with ExxonMobil (XOM). These corporate sloths don't deserve the light of day until they can actually grow their reserves and production.

To me, Petrobras is now the global energy leader and "energy market tell." Is it just me, or does it seem like Petrobras announces a new energy discovery every couple of weeks?

On the other hand, while companies like ExxonMobil have been recording record profits, I don't believe they're as well positioned for the future as is Petrobras. As an example, XOM has spent more money in the past year on buying back stock than prospecting for more oil (as defined by capital expenditures).

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs