Best of Brazil: Ultrapar, Petrobras and Bradesco

NEW YORK (TheStreet) -- A slate of better-than-expected economic reports in Brazil should calm inflation fears and boost stocks this summer, says Nick Robinson, manager of the Aberdeen Latin America Equity Fund (LAQ). Among Robinson's favorite Brazilian picks are Ultrapar Holdings (UGP), Petrobras (PBR) and Banco Bradesco (BBD).

The $287 million closed-end fund, which has recently been trading at a 9.9% discount to its net asset value (NAV), has seen its price rise 7.2% over the past year. The NAV of the fund has risen 6.2% over the same period. The fund doesn't employ leverage and generates an annual distribution rate of 4.8%.

Welcome to TheStreet's Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks and views on the market in a five-question format.

Why are you confident about the trajectory of Brazilian stocks this summer?

Robinson: We could be in for a slightly better phase for Brazilian stocks as one of the main worries that the market has had recently has been over inflation, and potentially that Brazil was going suffer from another inflation problem. More recently, there has been some good economic data that suggest this problem isn't going to arise. And with that concern gone, Brazilian equities can start to perform a bit better.

Has Brazil finally decoupled from the U.S. and coupled with China?

Robinson: There's a certain amount of that going on. China recently became Brazil's top trading partner so Brazil's link with China is more important than the link with the States. But the U.S. is still a very important trading partner to Brazil, so the health of the U.S. economy is still quite important.

The banking sector in Brazil is certainly on the rise. Why is Banco Bradesco your favorite Brazilian financial?

Robinson: We like Bradesco because it's a good way of playing the growth of domestic demand in the economy that's driven by the growth of the middle-class consumer. As more consumers get jobs, enter the middle class, make bank accounts and take out loans, it really powers that bank's earnings. And Bradesco is a very well-operated, high-quality lender with a good history of lending through the cycle, which is particularly important when looking at banks in Brazil.

And those consumers are also going to have to fill up their cars with gas. You like Ultrapar. Tell me about it.

Robinson: We are big fans of Ultrapar. It's a great company. It's very well-run, and importantly for Brazil, they take corporate governance seriously. They've got a long history of improving their corporate governance, which means the capital is likely to be better advocated for them in the future. And that will allow them to continue growing and continue opening gas stations, which benefits from record car sales in Brazil.

And I suppose that gas originates with Petrobras. How do you view Petrobras?

Robinson: Yes, you are right, a lot of that gas does come from Petrobras. Petrobras is doing all right. They had a tougher time last year when they had to do a second reissuing, which went OK in the end. It's a company where there were concerns over the amount of capital they were spending on their capex program. And those concerns are beginning to die down as the government has pulled them back from some of those aggressive programs, which gives us more confidence that the company is going to remain with a strong balance sheet and a good outlook going forward.

-- Reported by Gregg Greenberg in New York.

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