Gustavo Neffa
Partner & Director at Research for Traders, Economist & Professor
Brazilian domestic-market companies such as Nu, XP, Itaú, Bradesco, PagSeguro, CSN and Inter stand to benefit from a falling exchange rate, so positioning belongs in the domestic market. The exporters Petrobras and Vale are the ones falling today, which fits that call. The view was laid out in an iProfesional article on which CEDEARs could take off depending on whether Lula or Flávio Bolsonaro wins Brazil's elections. x.com
Excellent management makes dLocal, MercadoLibre and Nu Holdings three great companies to pick up at a discount after the Lula-election selloff. Their Brazil exposure sent them down 9%, 9% and 22% on claims that the investment climate had worsened, a claim worth questioning. x.com
Political fear after Lula election wins is a buying opportunity in Brazilian stocks, including EWZ, MercadoLibre and Nu Holdings. In USD, the table shows 12-month gains of 115% after 2002, 76% after 2006 and 18.5% after 2022, though shorter-term returns varied. x.com
XP Inc. is an average company trading too richly. It sits at roughly the same valuation as US peers such as Morgan Stanley and Raymond James, which it doesn't deserve given Brazil's higher discount rates. A hard rally on the day makes sense, but the valuation does not. x.com
Nu Holdings' sustained growth makes election-driven pessimism look overdone. Quarterly revenue before credit-loss provisions grew at a 45.1% annualized rate from Q1 2023 to Q2 2026 under Lula. This Brazilian shock looks like the tariff scare, when markets quickly shrugged off initial pessimism. FedexSTi notes that Nu reached 139 million customers and $1 billion in quarterly net income after enduring Brazil's 2014-16 recession, Dilma's impeachment and the pandemic. x.com x.com x.com
MercadoLibre and Nu Holdings have massive runways and have thrived across political backdrops, so they do not need tax cuts or deregulation to keep winning. Both have performed extremely well in Brazil under Lula since 2023, even in a fragile macro backdrop. The election-driven selloff left these cream-of-the-crop businesses at lower multiples, and more near-term selloffs are possible. x.com x.com x.com x.com
Inter & Co's newer cohorts do not mature at the same rates as older ones despite higher starting ARPACs, putting it at risk of serious trouble in the next credit cycle. Its leverage is much higher than Nubank's, yet its risk-adjusted returns are 5-6% against Nubank's 10-12%. Inter's ROE is below the 16%+ cost of capital for Brazilian fintech banks, leaving it unclear whether it can earn above that hurdle over time. x.com
Brazil's political developments have driven a selloff that makes Nu Holdings a dip opportunity. NU is down 19% amid the market's reaction. x.com
Nubank, Sea Limited and MercadoLibre are all great buys now, with Bolsonaro's first-round victory in Brazil good news for Brazil-exposed names. Per @StockMarketNerd, he performed much better than polls indicated and is generally seen as the more business-friendly candidate. Emerging-market names like these also serve as hedges against the US market. x.com
Nu's 33% ROE is not proven until it survives a full credit cycle, because a bank's underwriting is only tested when borrowers stop paying. Per @sytaylor, Q2 revenue rose 39% to $5.9bn and net income topped $1bn. The open question is what happens to that ROE when unemployment rises, payments are missed, credit losses climb and money gets more expensive. Brazil's slowing economy and rising NPLs are not the same as a full cycle; until then the reported ROE is somewhat fake. x.com x.com x.com
Nu Holdings' US entry targets people from Latin America now living there, rather than direct competition with SoFi or Robinhood; entering the US matters much more than Brazil's election. After Lula's reelection, Nu opened down 21% and was testing its yearly lows. This dip is likely a great long-term buy. x.com x.com x.com
