Zacks.com releases the latest Analyst Interview. Today’s interview is with senior analyst Claudio Freitas, who discusses Petrobras (NYSE: PBR), Cemig (NYSE: CIG), Copel (NYSE: ELP), CPFL Energia (NYSE: CPL) and Telemar (NYSE: TNE).
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Tell us about what you expect from Petrobras, now that it stands to benefit from a new off-shore oil discovery.
Petrobras (NYSE: PBR) has been doing great, and the medium-term outlook remains very positive. The company has been announcing a new important finding every 3 or 4 weeks and the giant field of Tupi and some others in the Espirito Santo’s basin in fact might be just one giant oil fiend with around 50 billion barrels!
The problem (there is always a problem) is that the oil is located in the pre-salt layer, more than 5 km below the sea level. It is not clear when these fields will be explored and how much it will cost to develop the area. Nevertheless, it seems that Petrobras will be the undisputable leader of the deep water exploration in the following years, and not only in Brazil.
Which two or three companies are your top Buy recommendations right now?
The moment is not very exciting for commodity stocks, however there are some interesting companies in Brazil that are focused in the local markets and are trading at very low valuations due to the recent rate hikes. I would suggest some cash cows like electric utilities, Cemig (NYSE: CIG), Copel (NYSE: ELP) and CPFL Energia (NYSE: CPL) and wireline operators like Oi Participacoes or Telemar (NYSE: TNE). Those are conservative stocks, cash-generating companies which are trading at low valuations.
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