Top 8 Brazilian Stocks

Mention Brazilian stocks, and most people think about high fliers trading at multi-year highs with nose-bleed valuations. But in spite of Brazil's growing economic profile, its leading equity index, the Bovespa, is actually trading in the red for the year.

Brazil Looking Strong

Although it would be easy to assign that downward pressure to slowing growth, its actually just the opposite. Brazil is growing so quickly that signs of inflation have begun to pop up in its economy, which has forced the country's Central Bank to tap the brakes and raise interest rates.

Brazilian Equity Index-Bovespa/YTD

No doubt that will present many unique challenges as Brazil continues to learn how to manage its growth. But in the short run, it offers an opportunity to buy a number of very strong names in the category that are trading well of their high or with a very attractive valuation. Let's go ahead and take a look at some of our favorite Brazilian stocks.

Top 8 Brazilian Stocks

Gafisa SA (GFA - Snapshot Report) is a Brazilian home builder with a market cap of $2.73 billion. This Zacks #3 rank stock is trading well off its all-time high from November and offers a highly discounted forward P/E of just 8X.

CPFL Energia (CPL - Snapshot Report) is an electric utility with a market cap of $12 billion. This Zacks #3 rank stock is trading near a recent high, but the valuation picture is well in check with a forward P/E of 13.5X, in line with the industry average. It also offers a fat 7.7% dividend yield.

Petroleo Brasileiro (PBR - Analyst Report) is one of the world's largest energy companies with a market cap of $242 billion. Struggling with some funding issues over the last year, this Zacks #3 rank's $37 share price is well below its all-time high above $75. The valuation picture is in check too, with a forward P/E of 11.5X.

AMBEV (ABV - Analyst Report) sells regular and alcoholic beverages with a market cap of $84 billion. I'm not sure this is a huge value play, but this Zacks #3 rank stock just split its share price 5-for-1, so at the very least this is an opportunity for some of the smaller accounts of the world to grab a reasonable allocation to a company with a strong consumer presence in a leading emerging market.

Ultrapar Holdings, Inc. (UGP - Snapshot Report) distributes liquefied petroleum gas and lubricants and has a market cap of $8.2 billion. This Zacks #2 rank stock recently pulled back from its high and offers great value, trading with a forward P/E of 15.5X, a nice discount to its peer average of 18.5X.

Cosan Ltd. (CZZ - Analyst Report) is an agriculture player, producing and selling sugar and ethanol with a market cap of $3.46 billion. Not only has this Zacks #3 rank stock recently pulled back on the interest rate conversation, it's forward P/E of 11.5X is a discount to its peer average of 12.5X.

Braskem S.A. (BAK - Snapshot Report) produces and sells petrochemicals and has a market cap of $9.77 billion. This Zacks #1 rank stock is trading at half its all-time high, but the valuation picture does look a bit hot at 31X. On the plus side, shares traded with a high forward P/E of 97X in 2007 and 80X in 2007, so this could be relative value.

Embraer S.A. (ERJ - Analyst Report) is an aerospace company with a market cap of $6.22 billion. This Zacks #1 rank stock offers great value, trading with a PEG Ratio (PE/Growth) of .68, well below the traditional benchmark of 1 for value.

The Takeaway

So as you can see, the weaker Brazilian index has presented an opportunity for those bold enough to buy when prices and valuations are a bit depressed. And if you truly believe in the secular growth trend coming out of the emerging markets, then Brazil is an excellent place to be investing for the long run.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.

Read the full analyst report on CPL

Read the full analyst report on GFA

Read the full analyst report on UGP

Read the full analyst report on PBR

Read the full analyst report on BAK

Read the full analyst report on ERJ

Read the full analyst report on ABV

Read the full analyst report on CZZ