GFA will go UP
$4.52 on 6/04/08
$11.29 (657.72% from time of market call)
GFA is a Brazilian homebuilder and construction and real estate services company. I believe that real estate prices in any given country are a reflection of the macro trends of that country's economy. The US has had spectacular real estate value appreciation since the end of the civil war when our economy really took off. Real estate prices in Asia have been explosive because of the success and growth of Asian economies. Check out real estate appreciation in China, Vietnam, India to see what I'm talking about. The Asian economies lack one of the advantages that Brazil has...natural resources. So in Brazil, there are homebuyers, businesses, farmers, miners, oil drillers, conservationists etc. all competing for land resources. Also, the Brazilian economy should be insulated from commodity shocks that could damage the economy. Brazil is an energy exporter thanks to its recent oil finds and robust sugar cane ethanol industry. US companies and farmers are moving there in droves to exploit this expanding energy and commodity market. Brazil has a longer growing season than the US so the Brazilian population should be insulated from food price appreciation or at least benefit from being a food exporter. All these factors should also collude to make the Brazilian Real a stronger currency...yet another tailwind.
A couple downside risks I see are Brazil's relatively small population to land area. Half as many people as the US with about the same land area. Hopefully, conservation of rain forest, a large amount of land used for farming and mining, and population growth and immigration will mitigate this population density effect. The other wild card in all this is the Brazilian government. They have a socialist tilt in a country with a very serious wealth gap. If this leads to some sort of civil unrest all bets are off.
The stock trades at a high multiple but I believe it is warranted considering the future growth potential. If you can get in under 40 I think you have a winner both short term 1 month and long term (1-10 years).