We have a long history with our latest featured stock, which happens to be the Brazilian national oil company, explains international investing expert Paul Goodwin, editor of Cabot Emerging Markets Investor.

When we first recommended Petrobras (PBR) in 2008, oil prices had just topped $100 for the first time.

Then came the steep decline in the price of crude oil. But the real knockout was the massive corruption scandal that erupted in 2014 which uncovered a history of bribes and kickbacks.
Ultimately, the scandal would lead to the impeachment of Brazil’s president Dilma Rousseff. The scandals are far from over, there are several good reasons to think that Petrobras is ready to reward investors again.

First, PBR still has a set of assets that few can match. It is a huge, integrated firm with interests in refining, electricity generation and natural gas distribution. Its fleet of drilling rigs includes 20 onshore and 50 offshore platforms.

Second, after two quarters of losses in the second half of 2014 and three quarters of losses from Q3 2015 to Q1 2016, the company registered a profit of two cents per share in Q2.
Analysts are now looking for a total of 28 cents in earnings in 2016 and a 146% jump to 69 cents in 2017. In other words, the turnaround has arrived.

The company has also been selling off some of its global assets to concentrate more on its core business, which is expected to increase profit margins.

Third, the chart for PBR shows that investors are finding value in the stock. PBR fell from $68 at its peak in May 2008, to a face-in-the-dirt low of $2.7 last January. But since that bottom, PBR has soared.

The other powerful catalyst, although an unpredictable one, is the price of oil itself. We have no insight into the future of crude prices, but the trend seems to be higher.

This is a big turnaround story, with several possible sources of additional support. For now, we’re going to take a half position in PBR, with the hope that it can continue the rally that began in February.

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By Paul Goodwin, Editor of Cabot Emerging Markets Investor