Ambev SA (ABEV) has drifted lower recently. Over the same time frame, the São Paulo listing — in local currency — has decreased by only half as much, signifying that the Brazilian real’s contraction is driving a lot of this performance — or lack of it. At some point, the trend will reverse, writes Benj Gallander, president of Contra the Heard.
Ambev engages in the production, distribution, and sale of beer, draft beer, carbonated soft drinks, malt and food, other alcoholic beverages, and non-alcoholic and non-carbonated products in Brazil, Central America and Caribbean, Latin America South, and Canada.
(Editor’s Note: Benj Gallander is speaking at the 2024 MoneyShow Toronto, which runs Sept. 13-14. Click HERE to register)
Despite its recent weakness, the name is cheap, the financial statements are solid, and the business is doing well. The latest results show a stable top and bottom line, a strong balance sheet, and a decent outlook for the rest of the year.
Ambev SA (ABEV)
The executives expect a decision on their tax dispute with the Brazilian government in the coming quarters, and there is a lot of litigation by various groups in Brazil regarding the government’s changes to how it taxes interest on shareholder equity. We will be watching to see whether the outcomes of these proceedings have a positive or negative impact on the organization.
Recommended Action: Buy ABEV.
