ECB Still Will Boost Rates in September

Emerging-markets valuations have made an extraordinary V-shaped move in the last six months, yet Brazil still looks almost as cheap as it did back in August.

Believe it or not, a big Brazil fund such as EWZ (NYSE:EWZ) has rebounded only about 6% since late August, when the Bovespa had been pounded to a forward P/E of 8.3.

As a result, the improvement in tone has barely brought EWZ back to a P/E of 9 — still far enough below the broad MSCI Emerging Markets valuation of 10 to tempt traders back to this healing-but-still-bruised market.

The question is, can those forward-looking earnings forecasts be trusted?

A slowing global economy will naturally drive analysts to downgrade their Brazilian earnings models to reflect reduced appetite in Asia for iron ore and pulp — China alone accounts for 15% of Brazil s exports.

The answer is to focus on stocks that are less exposed to China. So skip Vale (NYSE:VALE), the second-biggest company on the Bovespa and the largest miner of iron ore in the world. Besides, Vale s mines have been washed out by heavy rain, forcing it to leave 2 million tons of ore contracts unfilled.

We know China is still buying plenty of oil, though, which makes Petrobras (NYSE:PBR) a natural place to start looking. PBR is huge, but it s definitely on an upward trend — up 20% year to date and just cracking the 200-day resistance line in the last few days.

If we hold this line, there’s plenty of room for upside. Before collapsing in the August sell-off, PBR was moving in a comfortable range of $30 to $45 over the last few years.

To get back on that footing again, PBR will need to rally an additional 17%. Meanwhile, the stock is on the cheap side, with a P/E of 8.85, and even with its massive petroleum reserves, it s still priced at maybe 1.05 times book value.

PBR also stands to benefit from the ongoing shif! t in ins titutional portfolios, which were very underweight this stock for a long time. It takes a lot of buying to shift the needle here — we re talking about the fourth-biggest stock in the world — but the needle is definitely moving back in the right direction.

On the domestic side, banks are also relatively immune to the shifting export cycle and are best-positioned to benefit from the local central bank s recent efforts to relax some of the highest inflation-adjusted interest rates in the emerging world.

Still, Brazil seems to have won at least a temporary victory against inflation. The job market is tight, and despite the occasional problem for a fringe lender, credit quality is improving.

With conditions like these to work with, Banco Bradesco (NYSE:BBD) is probably our favorite name in the sector. BBD has it all: improving loan margins, net interest margins and a PEG ratio of just 0.50.

While the P/E is a little rich at north of 10, it still fails to reflect the true value of BBD s loan portfolio. Price to book is all the way down at 0.33.

Compare BBD with Itau Unibanco (NYSE:ITUB) and the choice is clear on just about every measure. ITUB is more richly valued, with a P/E of 11+, trades at 2.45 times book value and a PEG of 1 and even has much worse credit quality than its rival.

So why buy ITUB when you can get BBD? We have yet to hear a good answer.

On last note: Watch the Brazilian real for your next hints on where the Bovespa is headed. The real was one of the worst-performing currencies last year, printing a 10.5% decline against the dollar. But in the last three weeks, it has shaped up as one of the fastest-appreciating currencies in the world.

Institutional traders need to buy reais before they buy Brazilian stocks. If that s what s going on here, the long-looked-for rally could be on the way.

5 prolific Mercedes cars from years gone by

The Mercedes-Benz SSK. The name means Super Sport Kurz, or “Super Sport Short” in German, the model, which was built between 1928 and 1932, was capable of extreme performance, which it realised when it won numerous competitions. At the time, it was one of the most highly regarded sports cars although it was a wheelbase of an early Mercedes-Benz S.
The Mercedes-Benz W125 Rekordwagen was produced in the tail end of the 1930s derived from a recent car at the time. The significant difference was the engine as the Grand Prix race car had a lower engine, a V12, which was able to reduce drag.
The Mercedes-Benz SLR McLaren. This was a collaboration between Mercedes-Benz and McLaren Automotive. The grand tourer was built in England, more specifically Woking, Surrey and Portsmouth. Mercedes-Benz owned almost half of the McLaren Group at the time. The car sold between the years 2003 and 2009. Some commentators said they classed it as a GT.
The Mercedes-Benz S-Class. This series of luxury sedans was a introduced, along with the W116 S-Class in 1972. It continued on from former models who go a long way back, to the mid 1950s. The S-Class is Mercedes-Benz’s flagship and has introduced many of the brand’s technologies such as drivetrain technologies.
The Mercedes-Benz M-Class. This sporty, utility SUV was brought to the market in 1997. However, it was officially listed a 1998 model. Its success didn’t occur overnight but it eventually proved successful in the Us and Mexican markets. With regards to its size it is larger tan a GLK lass but smaller than a GL-Class, a model with a platform that it shares. At one point, it was also being built in Austria, with an eye on he European market. This was before it moved to a part of the US market.