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TheStreet Open House

Smart Investment Guide to Brazil

Stocks in this article: GOL TAM BBD

Oil & Gas

The country's Petroleo Brasileiro (PBR - Get Report), better known as Petrobras, has been a favorite with investors, including billionaire investor George Soros.

While most oil majors have been cutting back on exploration and development, Petrobras has laid their capital expenditure plans until 2013 ensuring that the company will grow faster than the industry average. In addition, the company has an expertise in deep water drilling rigs providing a competitive edge and is among the lowest cost oil producers in the world. The outlook for the stock remains robust.

Telecom

Brazil's Telecom industry will continue to enjoy outstanding growth in the mobile and broadband markets. However, local fixed-line telephone segment will likely stagnate despite the low tele-density. Hence, fixed line and mobile phone operators, Brasil Telecom (BTM), Tele Norte Leste Participacoes (TNE) and Telecomunicacoes de Sao Paulo (TSP) will likely underperform pure mobile service providers TIM Participacoes (TSU) and Vivo Participacoes (VIV).

On Wednesday, Telefonica (TEF - Get Report) raised its bid to $8.72 billion to buy Portugal Telecom's (PT) stake in Vivo. Telefonica and Portual Telecom each own 50% stake in Brasicel, which in turn owns 60% in Vivo.

The huge disparity between the rich and the poor will likely be more evident in the telecom sector. The rich continue holding multiple mobile connections while a number of Brazil households cannot afford to have any kind of telecom service. Buoyant economy and government sponsored schemes will help the poor to come out of the poverty, thereby supporting the growth of telecom sector in the long run.

Karvy Global Services (www.karvyglobal.com), a subsidiary of the Karvy group (www.karvy.com), provides specialized research in asset classes including stocks, mutual funds and insurance to leading Wall Street firms.
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