Usually, a 0.4-percent GDP growth rate would not be any reason for celebration. But expectations around the Brazilian economy were so grim that analysts were actually excited about the Q2 2019 results. The Brazilian stock market benchmark index reached a record 106,000 base points, and there remains room for it to grow further—leading investors on a hunt for sleeper stocks that could offer sizeable returns in the long haul.
Since January, the Ibovespa Index rose 16.4 percent—much less than ICON (which measures publicly traded retail companies), at 23 percent, and IMOB (real estate), at 31.2 percent.
That’s because, in a country as reliant on family consumption as Brazil, sectors which reflect the state of domestic demand are more sensitive to any improvement in economic outlook. Anticipating a heating up of these markets, investors tried to get ahead of the curve.
So, are there any opportunities left?
Analysts believe so. And that’s because the construction business has a longer developing cycle—from purchasing land to building and selling properties. Builders are still diminishing the massive inventories built up during the 2015-2016 recession and it takes time to pick up launches and new sales.
“Some building companies are big, but they had serious issues, such as Gafisa (which faces a fight between shareholders and changes in management). It is a company trying to reassemble—a process that could take time to fix,” said Régis Chinchila, an analyst at Terra Investimentos.
Construction is also famous for having ripple effects on other sectors—as it is labor-intensive and opens up a market for other players. For Mr. Chinchila, as new homes...
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