With another plunge in the exchange rate, there is once again a gulf between the performance of the actual business at Itau Unibanco (ITUB)
(ITUB4.SA) and the performance of the local shares and ADRs. While the
local shares haven't had a great six-month run (down about 6% versus a
3% drop in the Bovespa), the ADRs have suffered far more with a roughly
17% drop.
Between an upcoming election and a
recovery that has already seen some fits and starts, Brazil isn't
exactly a safe market. Moreover, while Itau is arguably the best-run of
the Brazilian banks and generated better than expected returns during
the downturn, management has a habit of over-promising and
under-delivering and needs to reinvest in the next round of growth
drivers. I do believe that Itau's shares are undervalued, but there's a
lot of risk and volatility that comes with this name that may overshadow
the opportunity for some investors.
Follow this link for the full article:
Itau Unibanco In A Wobbly Recovery Cycle
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