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Helô convida Stoxos #116 - Resultado de Outubro/26 — Transcript

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0:06Good evening, everyone. Uh, welcome to
0:09Elo com Vida number 116. I am Eloísa
0:12Cruz, and today we’re going to talk a
0:14little bit about the Stoxos Fia fund.
0:17So, uh, before we begin, I think just to
0:19provide some context, right?
0:22Today is November 6th, and we are right
0:26after the second round of the election,
0:30where Lula, against the odds—most of the
0:34probabilities—won the election, okay?
0:39So, uh, even before giving the—giving
0:42the details, right?
0:44Actually, I’ll start with the details
0:46and then we can keep talking, okay?
0:48I imagine—I wanted to know if everyone
0:50there can hear me and see me well.
0:54Let me just put this here to make it
0:55easier to follow along.
0:59Okay. Let's go.
1:02Uh,
1:04so let’s get started, right?
1:06Stoxos, in the month of October, fell
1:1027.57%while the Ibovespa
1:18fell 9.88%, so it was much worse.
1:22For the year, it is down 35—and it was
1:24down, right?
1:26At the end of the month, it’s a bit
1:28better now, but it was down 35.53%, okay
1:31?
1:32Small Caps fell 17.4%for the month and
1:3518.8%for the year, so we are performing
1:38worse than the Small Caps.
1:42So, even before I start talking about—
1:45about making the usual comments—I made a
1:48post on Twitter and I wanted to repeat
1:51what happened, right?
1:54Stoxos fell about 50%from its highest
1:57point; it was at an all-time high on the
2:00eve of the election, and it fell 42.9%
2:03the day after the election.
2:07Uh, for the week, with the Ibovespa
2:11falling 17.4%and the Small Caps falling
2:1532.2%for the week, okay?
2:18In the week—in the first week, which is
2:20more or less where we are now.
2:22Uh, so, a few things I wanted to share
2:24with you. The first is that the fund's
2:26objective is not to position itself for
2:27events, okay? So, the portfolio has
2:30remained relatively constant throughout
2:32the year.
2:33After the first round, I made a marginal
2:36reduction in positions; obviously,
2:38looking ex-post, if I had closed out the
2:41fund, it would have been much better,
2:43but I looked and I saw that we—I didn't
2:46see a scenario as catastrophic as the
2:48market, well, decided to price in, okay
2:51?
2:52So, just to give an example, I closed
2:54out the position in, uh, highways; I had
2:55a little bit of highways and I sold it
2:57off.
2:58I—I didn't position myself for the—for
3:00the election event, okay? I just reduced
3:03my positions a little; I didn't buy
3:05different positions, I held the fund
3:08much like I always have.
3:11And when you look at the fund's
3:13objective and the daily share price, it
3:15ends up being bad because the goal is
3:17very long-term, which is to hold large
3:19asymmetries, okay?
3:22So when you look at it that way, that's
3:24also why the fund is D + 120.
3:28So the idea, as I always say, is that
3:30it's a fund to be at most 1/3 of your
3:32stock market investment, so look at how
3:34much you have in stocks and put 1/3,
3:36even though I have more, with a 10-year
3:38horizon.
3:40Uh,
3:45So what happened?
3:47The magnitude of the drop in assets was
3:49very large, okay?
3:51So, for instance, PAR fell, it reached a
3:5470%drop, reaching R $ 5, and other
3:57papers in the portfolio also fell much
4:01more than that.
4:03Yes, today and yesterday they started to
4:05bounce back, so they were good days for
4:08the fund and also for the stock market
4:10as a whole, especially small caps.
4:13And what happens is that small caps
4:15usually have a higher beta, they usually
4:18have much higher volatility than the
4:20Ibovespa, okay?
4:21So, speaking of the 26th, small caps
4:23fell almost double.
4:26And that's nothing new, really. So the
4:28discussion is precisely that, the exit
4:30door is smaller, and then people just
4:33sell what they have without doing the
4:36math.
4:37I think that's one of the problems of
4:39the stock market today—not that fixed
4:41income pays so well in Brazil, but that
4:43you end up having few long-term
4:45investors, right?
4:47Few individual investors, and that ends
4:49up happening.
4:51The small cap drop—I'll call it 27, it
4:54was 26.92%—was the biggest tumble in the
4:57index's history, okay? And in the
4:59pandemic, it had fallen 17%, so it was
5:02the first circuit breaker since the
5:05pandemic, and the share price returned
5:08more or less to the level it was on
5:10August 18th, but you had several
5:13companies in the portfolio falling much
5:15, much lower than where they were at
5:18that moment, okay?
5:20Yeah, we've been through this before,
5:24right?
5:25Since the beginning of the club, we've
5:28had four drawdowns, and it recovered,
5:31okay?
5:34The stock recovered, I think the, the
5:36discussion is, and again, it's not that
5:38, oh, how great to drop 50%, but it even
5:40dropped while the fund was open, but the
5:43idea is it has already recovered and it
5:45will recover so much that we were at an
5:48all-time high on the Friday before the
5:50election, okay?
5:53Volatility will be part of the game when
5:55we look for asymmetry in smaller
5:57companies.
5:58So, in larger companies, you didn't have
6:01many companies with such significant
6:03drops.
6:06And the idea is that the annualized
6:08return of the club is around 20%, okay?
6:13So, when we look, and again, I know the
6:16club's history doesn't count for much,
6:20so you have to discount that, but in the
6:23same period, the Ibovespa was yielding
6:2710%and small caps less than 5%.
6:30So, I think there could be a discussion
6:33that, look, the small cap category is
6:36bad.
6:37I don't think so, okay? Historically,
6:39that's where the biggest asymmetries are
6:42, I'll talk about that in a bit.
6:45But I think there's a lot of opportunity
6:49. And I understand the frustration of
6:51the shareholders, okay?
6:53So if you're a shareholder and you're
6:55frustrated, I believe no one is more
6:58frustrated than I am, okay?
7:00Most of my net worth is in the fund.
7:06And the idea is that I really understand
7:08it's wrong, the valuations are wrong,
7:10and even for a Lula scenario, it's wrong
7:12; we'll talk about the scenario in a
7:14little bit, okay?
7:16I made some adjustments to the portfolio
7:19precisely to get back and chase the next
7:21all-time high.
7:23I think that, looking at it coldly,
7:26thinking it will be the worst-case
7:28scenario possible, there are some
7:30companies I didn't want to hold and I
7:33ended up reducing, so I think the
7:35scenario got worse than it seemed before
7:38the election, even with the possibility
7:40of Lula, okay?
7:43Yeah, okay.
7:46And so, I'll give you an example of a
7:48stock I removed, besides EcoRodovias, I
7:50I exited my position in Marco Polo, so,
7:53I think even though it's super cheap,
7:55we're seeing the stock trading at around
7:58a five times P/E ratio, I understand the
8:00scenario is more confusing in the case
8:03of Marco Polo, let me just turn on the
8:05air conditioning.
8:08It's here. It's It's hot.
8:11The The The scenario is It is worse and
8:13so, with the government more constrained
8:16, I think They might not want to do the
8:18school routes, might not want to buy
8:21buses for children, which is an
8:23important revenue stream, and they might
8:25not force the bus companies to replace
8:28and keep the fleet so new, okay?
8:30So, this type of of of of decision, I
8:33looked at it and said this is the kind
8:35of thing I'm not going to carry. So
8:38let's go, what now, right?
8:40So the scenario has changed, okay? I I
8:43moved things around, I made these
8:46changes, but precisely to have a more
8:49comfortable portfolio, but that doesn't
8:52mean less upside, okay? That is very
8:55important. I looked and I sought
8:57positions in the portfolio that have
8:59stocks at two, three, four times P/E.
9:03And what I really sought was precisely
9:04to turn around and say this first, right
9:06?
9:07I will always look for companies that
9:09have the potential to double or triple.
9:11So I think that is always my role and
9:13every day I chase after that.
9:16But there are companies that have this
9:18potential, for example, Home Builders,
9:20and there are companies that have this
9:22potential, say, for example,
9:27for example, Log, okay? Which is a
9:29company that makes that builds
9:30warehouses, which is a business that is
9:32in super high demand and so, even seeing
9:34some problems that some merchants are
9:36having and we are seeing a worse Brazil
9:38scenario, we we it is a company that has
9:40very high demand and I believe it will
9:42continue to have it. So the story is I
9:45have other stocks with Again, right?
9:48Let's Let's talk about another one here
9:50that you know I have, which is Priner.
9:53Priner depends on mining and mining is
9:55something that won't stop, it won't slow
9:57down.
9:59They have been winning new contracts, so
10:02, depending on how you calculate it
10:04because there are several possible
10:06numbers, it is trading between two and
10:08four times P/E for next year, eh,
10:10already factoring in some growth; it has
10:13the potential to grow, it has customer
10:15demand, it has a 20 billion real
10:17pipeline, considering it is a company
10:19that doesn't even make two in revenue
10:22and its competitors are struggling,
10:25so there is a lot going on and I don't
10:27think it will actually suffer from a
10:30drop in demand, okay?
10:32So my mindset is to look, and let's go
10:34with another one, talking about JSL for
10:36instance, okay?
10:38So you turn and say, ah, JSL.
10:41Eh, JSL first, it is less leveraged than
10:43the group, than the other companies
10:45within the group, that's one thing.
10:48Second thing is, again, the Brazilian
10:50scenario is not favorable, but when you
10:52look at its competitors, they are in a
10:54much worse situation.
10:57So much so that last quarter it won 2.8
10:59billion reais in new contracts, that's a
11:02lot for it, okay?
11:04Eh, I don't remember any number that was
11:07half of that.
11:08So, so what happens? Eh, eh, it is now
11:11working by renting assets from Vamos
11:16and its client, its competitors are
11:18suffering, so when the competitor starts
11:20to suffer, they can't maintain their
11:22trucks properly, they can't increase
11:23their fleet if the company has an
11:25increase in demand, so the clients, and
11:27remembering that JSL is perhaps the size
11:29of the next five companies in the sector
11:32combined, so clients are preferring to
11:34do more business with it.
11:37So, so you turn and say, again, right,
11:40the scenario has changed, it's worse,
11:42but listed companies tend to survive
11:44better, okay?
11:47Not just because they have access to
11:49capital, so I'll give an extreme example
11:51, but I remember that when the pandemic
11:54happened, all sectors closed down, but
11:56IMC managed to raise capital.
11:59So they have this better access, the
12:02client feels safer working with them, so
12:05we, I sought to look, and I think that
12:08in the long run, all these very bad
12:10scenarios end up being good for listed
12:13companies.
12:15This is important, okay?
12:17Then you say, ah, alright, Elo, but what
12:18if interest rates rise? What happens if
12:20interest rates rise?
12:22Uh, in my opinion, you'll have to factor
12:24inflation into prices, okay? Because
12:26when you look at it and start increasing
12:29the cost of capital, it only makes sense
12:31to start a new business if you raise
12:34prices.
12:35Then you have the factor that
12:39everything is already somewhat indexed
12:41in Brazil, and another expectation is
12:44that eventually, with the rise in the
12:47dollar—it's already up 10%—you tend to
12:50have a bit more inflation. If there is
12:52inflation, it’s not bad for the stock
12:54market, okay?
12:55And if you have companies with assets—
12:58and that was important in my selection
13:01criteria—well, what happens?
13:04You have a store of value there, okay?
13:08So, you have assets.
13:09Being in assets is very important. So,
13:12why? Because you have a store of value
13:14there.
13:15So, ah, inflation went up, but SLC’s
13:18land appreciates accordingly, and JSL’s
13:22trucks will also go up in price.
13:26So it’s important to look at that.
13:28And another cool thing is the following
13:30: if you compare it, thinking that the
13:33market took a hit because we're
13:34expecting a crisis, I’ll compare it to
13:37Dilma’s crisis, which was the most
13:39recent relevant crisis we had; what did
13:41we have, okay?
13:43Back in 2012, Dilma decided to force a
13:47drop in interest rates, okay?
13:51So when she brings down the nominal
13:54interest rate, right, the Selic, when
13:57the Copom cuts the Selic, since you had
14:00a persistent inflation scenario above 5
14:03%, the real interest rate collapsed,
14:06went under 2%, and the economy went
14:08downhill, because it no longer made
14:11sense, it started having many problems,
14:14and what happens then? Then capital
14:17flight, then the dollar rises, all those
14:20disasters. Then what happened? They had
14:23to raise interest rates to almost 15%.
14:26And when they raised them, the real
14:28interest rate reorganized, and they
14:29managed to hold inflation down; anyway,
14:31Temer came along, and we know that part
14:33of the story.
14:35In the pandemic, and just remembering
14:39that GDP fell more than 5%due to the
14:43scenario that Dilma left in Brazil,
14:47right?
14:49If I’m not mistaken, it was actually 7.8
14:52%.
14:52And so, what happened then? During the
14:54pandemic, you had the interest rate drop
14:57to 2%, so we had a negative real
14:59interest rate, and now, recently, the
15:01real interest rate has hit over 10%,
15:03okay? These are data provided by the IGC
15:06, sourced from the IBGE, Banco do Brasil
15:09, and the Central Bank. So, we are
15:12currently at the highest interest rate
15:13in history.
15:15It’s important to remember that when we
15:16compare this crisis to the Dilma crisis
15:18, what are you talking about?
15:21You're talking about a scenario where
15:24companies are already operating with
15:26higher interest rates, because the
15:29interest rate hike was very damaging in
15:32Dilma's case, why?
15:34Because companies were not prepared for
15:36such high interest rates. So we have a
15:38real interest rate, which is the nominal
15:40rate minus inflation, that is much
15:41higher, okay?
15:43Back then, the real interest rate hit
15:457.5%, and now it has hit almost 10%.
15:49So when you look at it, I'm talking
15:51about the ex-post number, okay?
15:53Then, you would have to discuss whether
15:56you, well, how you feel about the IPCA
15:58representing your inflation; I think
16:00that would be another valid discussion.
16:04But anyway, in the end, I looked and
16:07said, "Okay, this is the scenario," I
16:09don't think—I don't see companies being
16:12nearly as leveraged as in the Dilma
16:14scenario.
16:16And I'm talking about listed companies,
16:17right? And I know that in the real
16:19economy, we are at a record high for
16:21bankruptcy protection filings, so the
16:23Brazilian scenario is indeed tougher.
16:26So what happens, okay?
16:28What did I look at, and how did I—what
16:30did I think?
16:32Companies that depend heavily on credit
16:34or consumer confidence.
16:35I took those out of the portfolio.
16:37And let me just—I realized I'm cutting
16:39off part of my head.
16:40So, I think individuals will be more
16:43reticent; we are seeing it on social
16:45media, right?
16:47Today someone posted a video of a
16:48Bradesco branch; it should be packed
16:50because November has Black Friday and
16:51all that, but it's deserted.
16:53So, I think anything that depends on
16:56consumer confidence should suffer a bit
16:58more at this moment.
17:01And I looked for, and I sought out,
17:03companies that don't depend as much on
17:06that, that have their own specific
17:08dynamics, and typically companies that
17:10are in a moment of capturing market
17:12share.
17:14So, conceptually, they are able to
17:16capture market share.
17:19I'll give another example using Priner,
17:22but Priner has, in its mining operation
17:25service, I don't know, half a dozen
17:28types of assets, maybe a bit more, but
17:31they have these half a dozen assets, a
17:34shovel, a 5, 10, or 20-ton loader, and
17:37the trucks.
17:40And then what happens?
17:41Heck, if a client turns around and says
17:43, "Oh, I stopped operating," because it
17:45happened that Usiminas's mine stopped
17:46operating, they can take those assets
17:48and move them somewhere else.
17:50And you have demand because mining is
17:52booming, and then you have rare earth
17:53mining, you have growth in gold mining.
17:56Today Aura also released a really great
17:58result.
17:59So what happens?
18:01I am looking, okay, more at that kind of
18:04thing than effectively at things that
18:06depend on consumer confidence, and I've
18:09eliminated some of those from the
18:11portfolio, okay?
18:13How are companies reacting to the
18:15elections? Well, we are at the peak of
18:17the earnings season, right? This is the
18:20second-to-last week, next week is the
18:21last.
18:22The general tone in the conference calls
18:24is more cautious, okay? So the companies
18:26are all focused on cash generation,
18:28holding back the launch of large
18:30projects. So for three times now,
18:32holding back, holding back.
18:34You have companies like those in civil
18:35construction looking and saying, "Look,
18:37we're going to be more reticent now,
18:39we'll only launch something if there's
18:41high demand."
18:42And then again, comparing it to the
18:44Dilma scenario, everything is much less
18:47leveraged.
18:50I think the scare with the stock market
18:51drop, the dollar rising, and the
18:53interest rate hike sent several messages
18:55to the government that weren't sent in
18:57the other election.
18:58So there’s the photo, the video of
19:01Daniela Lima, because I don't remember,
19:03I remember Açaí was at a price that I
19:05think was three, four times today's
19:07screen price; they went up, CVC, Açaí,
19:10Renner, I think those were them. They
19:12went up in the aftermath of the election
19:14. So this time there was none of that
19:16because everything flipped.
19:19And then what happens, okay?
19:24When you look at the stock market like
19:26this, you look and say, "Alright, so
19:28what do I have?"
19:30So the Lula administration held a live
19:32stream with Janones yesterday, and I
19:34understand that this stream was for his
19:36base, and he's going to do another one
19:37on Sunday that I understand will be for
19:39the market audience, okay?
19:42Uh, I expected that in the stream for
19:45his base he would commit to whatever he
19:47promised during the election so as not
19:50to commit electoral fraud.
19:54And then, on the Sunday stream, he would
19:56give a more careful speech regarding
19:58fiscal policy, right?
20:00So the relevant part is that he set up a
20:02bunch of landmines for the previous
20:04administration, and in the end, those
20:06mines ended up falling into his own
20:08hands.
20:10Uh, so despite that, in yesterday's
20:12stream he mentioned some things about
20:15fiscal responsibility and so on.
20:17Again, we weren't expecting a super
20:20fiscalist government; we are expecting
20:22more of what isn't good, like an
20:24increase in public debt, etc. But still
20:27, he's already more backed into a corner
20:29, right?
20:30Dilma inherited a country with much less
20:33debt, so he doesn't have much room to
20:35make mistakes here, and he has received
20:38all the messages he needed to receive.
20:41You can see that in every moment, in
20:43every interview he gives, you're seeing
20:45a more worried face.
20:48Now, there are many companies trading at
20:51below three times EBITDA or three or
20:54four times earnings, with 25 to 30
20:57percent [upside]. There's even a
20:59question here, right?
21:02Uh, from Luiz Fernando, which is about
21:04Vamos at 30 percent.
21:07Do you think it's a great opportunity, a
21:09good deal?
21:10So look,
21:12there are many things that are great
21:14opportunities, okay? I think what you
21:16have to look at—and I have it in my
21:18portfolio—is that you have to look and
21:20say, man, I think there is something
21:22that could go very wrong.
21:26And then, keeping in mind, for example,
21:28again, right?
21:29An interest rate hike would be very
21:31concerning without inflation. So we're
21:33saying, gosh, the real interest rate is
21:35at 10 percent; if it goes to 15, that's
21:37a catastrophic scenario.
21:40But look, this government is giving
21:42several signs that it won't do that, and
21:44what happens if you don't raise rates is
21:46that you unanchor inflation, and then
21:48you increase, you carry higher inflation
21:50, and then again, right? So, if there is
21:52higher inflation, real assets on the
21:53stock exchange are a good deal, and
21:55Vamos is a real assets company.
21:58So, uh, when you look at it, you have
22:01several companies in resilient sectors
22:03that are trading at these multiples.
22:06Oh, because they're small caps or for
22:08any other reason like that.
22:11I, Elo, who entered the financial market
22:13in 2007, I’ve never seen this kind of
22:15thing, you know?
22:17So, in 2002, which was before Lula's
22:20first term, there was that too. So,
22:23companies trading at two, three times
22:24their value, it happened.
22:26I myself had never seen it before. And
22:28then, again, right? You turn around and
22:30say, oh, the only thing is you need to
22:32be very selective in these moments,
22:34because there are opportunities, but
22:36obviously some things will go wrong,
22:38okay? So, you always have to be very
22:40careful.
22:41There’s a, a, a song we sing at church
22:43called "Rompendo em Fé"(Breaking Through
22:45in Faith).
22:48And it has a little part that says, if
22:50the sea doesn't open before me, God will
22:51make me walk upon the waters.
22:54And I always say, you know, in my
22:56courses I always told my students, that
22:58the adapted version would be, if the
23:01stock doesn't rise before me, I will be
23:03remunerated in dividends.
23:06So, if you look and obviously the number
23:08from the last 12 months isn't a great
23:10number to look at, but if you look at
23:11the dividend yield from the last 12
23:13months, remembering, why isn't it so
23:15good?
23:17Because due to the, the, the rule that
23:20started charging dividend tax, you ended
23:24up, you ended up in a situation where
23:28the,
23:31where the, where the dividend is higher
23:34than it should be, and then you have a
23:36discussion that some companies tend to
23:39have a reduction in profits, but look,
23:41you have companies looking back paying
23:4420, 30, 40, even 50%dividend yield.
23:47So, Light is one of those, like, maybe
23:50it's the cheapest stock in my portfolio
23:52. Then you say, Elo, but it sells cell
23:54phones. I know, but the cell phone
23:55market is a market where people
23:57basically only exchange them when they
23:59need to, when it breaks, when the phone
24:01is, is lagging, etc. So, we're not
24:03talking about a booming market, we're
24:04not saying that the smartphone market is
24:07going to grow.
24:08And conversely, right, with the problems
24:10Casas Bahia had, which was, which was a
24:12very large client, suppliers are
24:14preferring not to take on the client's
24:16risk and are passing it through a
24:18distributor, because the distributor
24:20knows the client better and mitigates
24:22this risk better.
24:25And you still have the upside that it
24:27will, uh, it will have Starlink, right?
24:30So, look, you have a bunch of companies
24:32trading at two times P/E. So, look, you
24:34have a bunch of companies that are super
24:36cheap and that will survive.
24:39Uh, and then you have that and, again,
24:41right, we will have companies leaving
24:43the game, okay? We had some recently and
24:46we will have more, but I think it will
24:48be fewer among listed companies, okay?
24:51It's just that historically these
24:52companies gain market share in these
24:54scenarios, I've already said that.
24:56I talked about asset-heavy companies, so
24:58I have land companies, property
24:59companies, anyway.
25:01And remembering that I was even having a
25:04meeting with a client, uh, remembering
25:06that listed companies, even when they
25:09are small caps, often they are leaders
25:11in their sector. So, JSL itself, which
25:14is a company worth 1 billion dollars,
25:16200 million, or 1 billion reais, 200, 1
25:18billion and a bit, right?
25:20Say 200, 300 million dollars, uh, it is
25:23the sector leader, it is dominant, it is
25:26larger than the sum of who knows how
25:28many next competitors.
25:31So, Brazil doesn't run without it.
25:34It has 2%market share, okay, that's fine
25:36, Brazil runs without it, but, uh, it
25:38isn't replaceable, so, if it stopped
25:39operating overnight, there would be no
25:41one to replace it.
25:44Okay? So, look, so ultimately, and,
25:46again, right, it isn't that leveraged
25:48and such.
25:50So, you could turn around and say, even
25:51if you have a slowdown, oh, what if all
25:53the country's cargo loads drop 20%?
25:57Like, the company is leveraged at two
25:58times and a bit, right? Not, say, five
26:00like it was during the Dilma era.
26:03The, the, the group itself is leveraged
26:06at 2.7 times and with clients like Vale
26:09, so top-tier clients, Mercado Livre,
26:11right, Ambev, Suzano, companies that we
26:14don't believe will have any problems.
26:18So, that's what we have, okay? I think
26:21the outlook is still very open, we don't
26:23know what will happen, there is, ah,
26:25questioning of the election, those
26:26things, is it worth paying for that?
26:28Sure, sure.
26:30So, what we need to do here is look at
26:32what's happening, see the Senate
26:34election, how it will be, if it's
26:35Rogério Marinho it tends to be better,
26:38if it's not Rogério Marinho, if
26:40Alcolumbre continues it tends to be
26:42worse.
26:44it will follow, right?
26:46There is a discussion at the Supreme
26:47Court and it seems they split with
26:49Flávio Dino, Moraes and Gilmar Mendes on
26:51one side, then on the other side there
26:53are the others, and everyone is trying
26:54to understand where Cármen Lúcia stands
26:56, like there's going to be a lot of
26:58discussion.
27:00At this moment, companies that are very
27:03cheap and resilient and have the
27:06potential to to to win, and then again,
27:09right?
27:10I'm not talking about a bull market
27:12scenario, but even without a bull market
27:14scenario it's a stock that could double
27:16without us having a bull market, so I
27:18have a lot of those things in my
27:20portfolio.
27:21And I think that's it, I'll answer the
27:23remaining questions here and that's what
27:25I have for today, okay?
27:28The question about HBR, what I thought
27:30about this HBR sale.
27:32So HBR is a property company, it just
27:35merged with Elbor, okay? So in this
27:38merger, it joins both companies and
27:40there are a lot of operational synergies
27:43, expense synergies, anyway, a good part
27:45of the top management is reduced, you
27:48stop having various discussions, they
27:50can do business together, anyway.
27:54And it just sold, I'm not even looking
27:57much, but the market cap before the drop
28:00added up didn't reach 700 million, it
28:02must have fallen by more than half, so I
28:05could have even gotten that number, but
28:08the company went there and sold assets
28:11for more or less 940 million reais, I
28:14lost my wait a second I lost you guys
28:17here.
28:18So, so what happens? You have, what did
28:21I think of it? I thought it was very
28:23good, okay? So two things, one, there
28:25should have been a sale of the main
28:27Elbor building about six months ago, but
28:30it fell through because the guy wanted
28:32to hand over shares, they wanted cash.
28:36And there you had, you have a client
28:39like WeWork, which is a big client that
28:41increased the rent to R $ 300 per square
28:43meter, just to compare, Itaú rented 10
28:46Etec near Shopping Morumbi, a building
28:48for 115, 115 or 130 reais per square
28:50meter, one hundred and something.
28:54So what happens?
28:57When you look at this, I mean, what is,
28:59what is on my mind, okay?
29:02When you look at this, I turn and say,
29:04oh, okay.
29:05Uh, how do I see this going forward? So
29:07let's go, they managed to sell it and I
29:09remember the first, first company I
29:11spoke to on Monday, how was it, it was
29:13them, I said, how is this deal going to
29:15turn out?
29:17I turned and said, is it going to open?
29:18Then they said, look, we don't have any
29:20indication that it will open.
29:22I swear that I, that I, that I looked
29:24and said, man,
29:27let's follow this closely. So the deal
29:30went through, they receive a good part
29:31of the cash upfront, so they can pay off
29:33all the debts, there's cash left over,
29:35anyway.
29:37Uh, it is a company that is a little
29:38more leveraged, I have a little bit of
29:40it in my portfolio.
29:44And, and that's it, so that's my, my
29:46take, I thought it was a hell of a deal
29:47, surprising that it was kept, okay?
29:50I don't know how strong the contract was
29:52, but anyway, it's over now.
29:55Uh,
30:00there's a discussion here about whether
30:02it should have been Flávio or Tarcísio
30:04and, like, this is the discussion of "
30:05what ifs", right?
30:07So damn, if, if I had zeroed out the
30:09whole portfolio, the fund, I think, like
30:12, there's this discussion, I, I think
30:15the only thing I can take from this is
30:17that, like, I think that, in the next
30:20election, it won't be Flávio, okay?
30:23Uh, and then, what else do you think
30:25that with the tax reform there could be
30:27a fiscal surplus in the next four, in
30:29the next four years, considering that
30:31there is an estimated 400 billion in tax
30:34evasion and an increase in taxes for
30:36services and a decrease in
30:40Look, Luiz, if you want to know, I
30:42fluctuate between being convinced that
30:44this tax reform will pass now or that it
30:47won't.
30:48But, uh, what it could have, okay?
30:54The tax rate goes up in most cases, okay
30:56?
30:57So, yeah, I think that's there.
31:01You have another side to it, which is
31:04that it brings everyone into a more
31:06formal structure.
31:08So I think that helps with this part
31:10regarding tax evasion.
31:11But honestly, for me, the big fiscal
31:14game is when you put
31:17is when you manage to increase activity
31:19, right? And I think the challenge of
31:21increasing activity has become greater.
31:24With the advantage that a large part of
31:27our activity is agribusiness.
31:30And as for agribusiness, I have no
31:31expectation of any reduction, especially
31:33because there's a rule that if you don't
31:36plant, your land can be taken, right? So
31:38the agricultural producer is kind of
31:39forced to plant every year.
31:42Then you have all the mining and oil
31:44activities, which keep growing well,
31:46take the oil companies as an example.
31:51And then we'll have to see how the rest
31:53turns out, but the informal sector is
31:55really huge and the trend is for tax
31:57evasion to decrease significantly.
32:00So the discussion about the surplus is,
32:02I'm mentioning this because I've had 300
32:05discussions about it, how to maintain
32:07the surplus, and so on.
32:09And look, the surplus discussion might
32:11hinge on inflation, okay?
32:13In a scenario where perhaps the target
32:15center should never have been changed to
32:183.5, which is what happened during the
32:20pandemic, and perhaps if we say we're
32:23working with a figure of 4.5 and go back
32:25to 4.5, you can keep interest rates
32:28where they are, and then you have, even
32:30with the dollar a bit higher, you have a
32:33bit more inflation, and I don't think,
32:35and in all these discussions the
32:38government is complaining a lot about
32:40Galípolo,
32:41right? Galípolo, in the end, was a
32:43pleasant surprise, wasn't he? Compared
32:45to what we were expecting. Let me just
32:47put this aside now that I've finished
32:48reading it, because it's easier.
32:50So, it was a pleasant surprise because
32:52he tried to control inflation and, well
32:55, you know? And he didn't lower interest
32:57rates by decree.
32:59There is a possibility of lowering them
33:01by decree. I don't think they'll lower
33:03them much, but if you don't change the
33:04rates, and the last Copom meeting could
33:06have changed them and didn't, right?
33:08Which was this week. So if you don't
33:11change the rates with a little more
33:12inflation, the real interest rate falls
33:14and, eventually, everything returns to
33:16normal.
33:18I do think that the fiscal reform will
33:21indeed be a little inflationary and will
33:25also increase tax revenue.
33:31So, in the end, he asks here, right?
33:36Uh, tax increases on services and a
33:38reduction in exemptions.
33:40What I think might also happen is this,
33:42right?
33:43With people needing invoices and needing
33:46the entire chain to pay taxes, yes,
33:48Brazil will really move more into
33:50formality. So that could also help.
33:53You can't rely only on that. Now, what
33:55could happen is investment in
33:57infrastructure, right? Because what
34:00happens is, consumption will be more
34:02difficult now. I think you have a
34:04discussion about the employed population
34:06, right? Because you have a discussion
34:08where unemployment is low, but also
34:09partly because of Bolsa Família.
34:12So the economically active population is
34:15smaller.
34:16So you're going to How do you do it,
34:17right? So how do you encourage
34:19consumption? Oh, you remove the tax,
34:21there's another 200 million left over,
34:23well, not from taxes, right? But it's
34:25200 million for the economy to turn,
34:27anyway.
34:29Uh, I think we'll have that. Again,
34:31right? I I was already expecting a
34:34negative GDP result for next year.
34:37Uh, and so, perhaps even with Flávio,
34:39okay?
34:40So the mindset, the mindset is exactly
34:44this, right?
34:46Consumption has already started to slow
34:48down, that's already quite clear.
34:50So, the answer, after all this rambling
34:53, the answer is, do I think there could
34:55be a fiscal surplus?
34:59It's possible. Do I think there will be
35:01?
35:01I I don't want to write it, I don't want
35:03to say that.
35:05But that's what I had to tell you, folks
35:07. Again, right? Obviously, I'm super
35:09frustrated, very poor performance this
35:11month, uh, and making my mea culpa here
35:14, even though it's the portfolio I've
35:16always carried, I could have reduced it
35:19, I could have reduced it much more.
35:23Uh, but, uh, now let's move forward, so
35:26, like, I still have all my money in
35:29there, uh, I think it's possible to
35:31recover even in a Lula scenario.
35:34Again, right, we're here at share price
35:3711 and and this here, again, could could
35:40be much better, but, you know, this is
35:43Brazil, right? Brazil will never be
35:45great, so there's no scenario where you
35:47turn around and say, everything will be
35:49fine. So, we'll keep surviving, on the
35:51other hand, the discount rate here is
35:53higher.
35:54Uh, there's just one last question here
35:56, given the large upside the fund had,
35:59why not adopt a more defensive stance?
36:03Ah, to to preserve the share price first
36:05for the second round. I I adopted a
36:07marginally more defensive stance, right
36:08?
36:09So, could I have I should have gone much
36:11more defensive?
36:13I should have. Ex post it's very easy to
36:15say, right?
36:16But but that was it.
36:19I think that's it, everyone. Uh, a kiss
36:22to you all, God bless. I'm working day
36:25and night, literally, to go after things
36:28that will have fewer disappointments and
36:31that will allow the fund to move forward
36:35as soon as possible, even in a Lula
36:37scenario, okay? Again, uh, stocks are
36:40for the long term and I really wanted to
36:42be delivering a much better performance
36:45, but I hope to and will chase this
36:46recovery.
36:48A kiss to you all, God bless and see you
36:50next time.

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