Bolling: Buy Brazil Through This ETF
Viva Brazilia!
I was listening to a great interview with Warren Buffett Tuesday morning where he was speaking to a group of media people from Switzerland. I love listening to this man. He is the greatest investor of our time. I would say of all time when you consider the fact that his accomplishments were made without the benefit of the industrial revolution -- an era when so much of the world's wealth was created.
I find his simplistic approach to everything very enlightening. He says that in order to be considered as a potential candidate for a spot in the
Berkshire Hathaway
(BRK.A) - Get Report
family of businesses, a few things must be evident. The company has to be big enough to "move the Berkshire Hathaway needle." It must be run by management that Warren trusts will manage it the same way "the day after a deal as they would the day before a deal." And also it must be simple enough for Warren to understand.
I found this important on several levels. First, it tells me that when Warren Buffett steps down, I am out of Berkshire Hathaway until whomever takes over proves he or she has inherited the Buffett gift for recognizing the right deal. That's because I am sure you cannot teach that gut feeling.
Next, I realize that investing can be simple, not easy, but simple. We don't necessarily have to dig three or four levels into the books to make money. There are those that do quite well micro-dissecting the balance sheet and they are rewarded for their work. Then there are the rest of us.
I, for one, prefer to invest the way Warren does --with an understanding of the company and its financials. I like businesses that seem to make sense and give me that gut feel that they will grow.
For instance, when I recommended
Schnitzer Steel
(SCHN) - Get Report
as a derivative way to benefit from the steel rally, people laughed. Then I recommended
Tesoro
(TSO)
because
getting pretty strong in early 2007. We had a nice run and then the crack started to fall apart. We got out of Tesoro ahead of the rest as they were slow to see the weak gasoline prices drag earnings and guidance. I am just now starting to like Tesoro again.
Getting back to Buffett's interview, he made an interesting comment that he was in the Brazilian Real and was interested in a Brazilian company. I watched the
iShares MSCI Brazil Index ETF
(EWZ) - Get Report
all day today and in a really bad tape, it performed. It settled up a bit for the day on the strength of one of its bigger holdings,
Petrobras
(PBR) - Get Report
, and a scorching oil market.
The EWZ has a nice cross section of Brazilian companies. In addition to PBR, the ETF holds (owns shares in)
Vale Doce
(RIO) - Get Report
,
AmBev
and
Gerdau
(GNA)
, among others.
I have called AmBev recently and love the fact that Brazil is on the verge of becoming a major player in the global oil-and-gas trade. AmBev brews several very popular Latin American beers and has a unique licensing deal with
Pepsi
(PBG)
to distribute in populated areas throughout Central and South America. Vale Doce is a Bolling favorite for years, and along with the steel trades I have recommended over the last two years, has been one of my most consistent performers. And Petrobras has recently announced that they have made a major oil discovery that could put Brazil in the running as one of the largest holders of oil reserves in the world.
If you have been reading this column, you know that Gerdau Steel would be a pick just for my views on the steel industry. I firmly believe that a drop in oil prices would be a big tailwind to an industry already on fire. I recommended
US Steel
(X) - Get Report
,
Mittal
(MT) - Get Report
and RIO in the recent past.
At 186 million people, Brazil is ranked fifth in population behind China, India, U.S., and Indonesia. It has a GDP of nearly $1.3 trillion, ranking it 11th in the world, but her per capita personal income is way down at 23rd. There is room to grow in Brazil. The agricultural business is thriving, thanks to sugar for ethanol as well as soybeans. Every year Brazil is ranked second in soybean production behind the U.S.
A word of caution is in order, however. Investing in emerging markets and emerging market ETFs is risky business. The flows of money in and out of these investments are drastic and quick, causing a highly volatile trade. The EWZ ETF has a market cap of more than $9 billion but that won't slow the moves up and down, so be prepared for the bumps in the road. I like the trade as long as the EWZ stays above $92 on a settlement basis. If it settles below $92, I no longer like it. With a close Tuesday at $100.47, that is about an 8% risk on the downside but if the market firms in general, this ETF may continue toward $120.
As always, trade with your head, not over it....especially when dealing in emerging markets trading!
At time of publication, Bolling was long RIO and X, although holdings can change at any time.
Eric Bolling is a host on the new Fox Business Network. Bolling was one of the developers and original panelists (nicknamed "The Admiral") on CNBC's "Fast Money."
Bolling is an active trader specializing in commodities, resource trades and ETFs.
Bolling is a member of several exchanges including The New York Mercantile Exchange (NMX), The Intercontinental Exchange (ICE) and The Commodity Exchange of New York.
After spending 5 years on the Board of Directors at the NYMEX, he became a strategic adviser to that Board of Directors where he assisted in bringing the company (NMX) public. He has been included in Trader Monthly Top 100 in 2005 and 2006. Bolling was the recipient of the Maybach Man of the Year Award in 2007 for his contribution of philanthropy and willingness to de-mystify investing to Main Street.
Bolling graduated from Rollins College in Winter Park, Florida and was awarded a fellowship to Duke University. Bolling was an accomplished baseball player. He was drafted by the Pittsburgh Pirates where he played before his career was cut short due to injuries. He honors his baseball past by sporting the NYMEX trader badge, R.B.I.









