The Two Most Traded Brazilian ADRs

Companhia Vale do Rio Doce (RIO) and Petroleo Brasileiro(PBR) are the two most traded Brazilian ADR stocks in New York.

Until recently RIO always used to be in the most active list in NYSE. But recently PBR seems to be joining this list as well. For example, today RIO had a volume of 40M and 35M shares of PBR changed hands. PBR is becoming an attractive stock for many investors including institutional funds as it is an oil play. Many emerging market and Latin America focussed funds hold PBR by default. Similarly RIO has been a long-time favorite of investors since it is in the mining sector and one cannot ignore natural resource stocks when investing in Brazil. Below is a quick review of the these two stocks.

1. Company Name: Companhia Vale do Rio Doce (Vale)
Ticker: RIO
Country: Brazil
Sector: Mining
Dividend Yield : 1.14%
P/E Ratio: 9.33

Beyond Brazil, RIO has operations in Canada, Australia, China, Indonesia,etc.The market cap. is $114 B and there are about 4.8B shares outstanding. The stock had a great run but cratered badly after the commodity boom crashed in emerging markets. From a high of $44 a few months ago, the stock has fallen to $23+ today.

RIO’s revenue has increased each year for the past 5 years and it has raised dividend at an average annual rate of about 22%. RIO is a great stock to play the commodity boom. But it is a risky sector to invest in as well since commodity prices will crash rapidly within a short time. The recent crash in oil and other commodities is proof of that. One should not invest in this stock unless they have a well diversified portfolio involving many sectors and spread over different countries and asset classes.

2. Company Name: Petroleo Brasileiro SA – Petrobras (Petrobras)
Ticker: PBR
Country: Brazil
Sector: Oil
Dividend Yield : 0.08%
P/E Ratio: 11.96

PBR is a perennial favorite of many Latin American investors. Its market cap. of $207B is bigger than Chevron, TotalFina, Eni Spa etc. PBR is up about 34% in 52 weeks. The company has great long-term growth as well with the 5-year revenue and earnings growth in the 40% range. The P/E is a bit higher than its peers but thats because PBR has better growth potential. After reaching a high of over $70 PBR goes for about $48 today.

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