But something fascinating is happening now in the Brazilian market. Last year the general view was about the emerging markets and specially about Bovespa that is nothing happening there and we should forget those. But this January against the main sentiment we placed a bet on Bovespa and started to buy on 11th January with quite a huge stake. So far, the index gained around 20% and this is our best performing asset in the last four months.
The index recovered from 45.255 up to recent price around 54.000. In our expectation this year will be a great performer the Bovespa index and could jump first to 58.000 resistance level and if it would be taken the next stage is at 63.000. It is realistic by the end of this year.
Why did we buy this January? Because we are contrarian and we had two arguments:
- Bovespa is massively lagging behind the US and European markets and it is still far from the 2010 October top 74.000 points. From that level dropped in the last three years more than 40% and we love the oversold markets. That was a huge arbitrage option between Bovespa and main US indexes.
- We always bet on the unpopular assets not on the trendy ones. Our motto is that the rookies are buying the hope... and buying the hype. We do selling the hype and buying the pessimism. At the beginning of 2014 there was a huge pessimism and concern about emerging markets generally. The sentiment was overwhelmingly negative regarding Bovespa.
Being contrarian is not easy, but who said being a contrarian was easy? It always feels better buying something that everyone else is buying too. But, that way doesn’t create too much profit.
Trading against the mass’s sentiment is not easy, but it's definitely doable. There's nothing new under the sun, as Ben Graham reportedly said once „The smart investor greets downturns as chances to find great investments”. That is the way that we are waiting always for good bargains like the deal at Bovespa.
The BFM Assets Team.
The BFM Assets Team.
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