Latin American stocks managed to dodge the battering their North American peers got in 2022. And investment bank UBS thinks the bull run will continue this year. This sentiment is also reflected in the iShares Latin America 40 ETF , which is up nearly 4% this year after delivering a 10% gain last year. The U.S. benchmark S & P 500 is up by a similar amount this year — but slid by more than 19% in 2022. UBS shared with clients its top stocks listed in Latin America, where it expects “near-term catalysts” to move share prices. “We’ve focused on stocks where we believe our analysts have a truly differentiated view vs. consensus and where we see near-term catalysts playing a major role,” the analysts wrote to clients. The following are three buy-rated stocks with more than 50% upside from UBS’s “high-conviction ideas with catalysts” report, dated Feb. 8. Cielo UBS analyst Kaio Prato expects shares in Cielo to rise by 88% to 4.79 Brazilian Real ($0.9) a share over the next 12 months, significantly more than the 6.3% consensus average price target compiled by FactSet. Cielo, Brazil’s largest credit and debit card operator, is expected to benefit from the Brazilian Central Bank’s decision to cap interchange fees from Apr. 1. These fees are usually paid by payment processing firms, like Cielo, to banks that issue the cards to customers. Sabesp The investment bank expects shares in Sao Paulo state-based water supply and treatment company Sabesp to rise by 59% over the next 12 months, which aligns with consensus estimates. UBS said the company, one of the world’s largest sanitation companies serving 28 million people in Brazil, will benefit from the efficiency and privatization drive expected from the newly elected São Paulo state chamber. According to UBS, the majority of elected members in the state legislature are from right-wing parties that have historically been more in favor of privatization. Vibra Shares of Vibra Energia , the largest gas station operator in Brazil, are expected to rally by 50%, according to UBS. Their price target is twice as high as the average price targets of analysts polled by FactSet. The company spun off from oil major Petrobras in 2021 and is set to benefit from its $590 million acquisition of an energy trading firm Comerc. While that deal was initiated in 2021, UBS believes “the market is not pricing in” earnings upside from Comerc. “We expect earnings through 2023 to be positive catalysts as upside from Comerc increases its share within Vibra’s consolidated [earnings],” said analyst Luiz Carvalho. “Particularly [second half this year] may prove to be an important signal of the potential upcoming dividends once leverage drops further.”
