Rubadubdub ITUB (2.0)
Fresh off a 100% loss on short dated Brazilian oil calls (PBR, 50% overall account loss) AND 3 day ban for the original post, I’m back.
Positions: 1.4K ITUB 9/17 $6 C CB 0.23
Itau is the largest banking institution in Brazil, has a rigorous history of merger and aquisition strategy to increase market share, ~8% revenue decline in 2020 compared to ~20% for the industry big dogs (JPM, Citi), increasing tech investment and my Brazilian friend said they were the best out of Itau, Bradesco and Santander.
The bull market in value stocks since November was prematurely aborted in Brazil for obvious, public reasons <political statements deleted>. The stock is still ~50% off Jan 2020 highs, IMO putting it solidly in undervalued territory.
<political statements deleted>, one analysis is that things might not be as bad as they seem in the Florida of South America (shoutout to @CallsOnAlcoholism) and even if they are, they have until September to figure it out. Other bullish signals:
– The Brazilian Central Bank made use of a recently passed autonomy law (limiting exec/legislative interference) by increasing its benchmark interest rate to 2.75% [larger than expected 75 bp increase compared to 50 bp expected] and they signalled a repeat at their next meeting in May. Rising interest rates are generally good for bank stocks as they increase revenue/margins. Whether they are similarly good for emerging economy bank stocks, I guess I will find out.
– The three analysts I could find that follow this stock returned an average price target of %7.50 (just confirmation bias, analysts are mostly tea-leaf readers).
– Minimal short interest 25M shares (0.6% of float).
Brazil has a funny trend of shitting the bed when you expect it to pay off, and paying off when you expect it to shit the bed. My analysis is that the negative catalysts have been priced in, blood is in the streets, and the probability of positive catalysts appearing before September is greater than 0.5. Shares are likely a better play than options, substantial return potential and lower risk.
O demonio só tenta quem que esta mais perto de deus.
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March 19, 2021 at 11:18PM