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Top Latin American-Focused Hedge Fund Shorts Consumer Stocks

Top Latin American-Focused Hedge Fund Shorts Consumer Stocks

Posted by Juan Gavasa on November 27, 2014

The Cayman Islands-incorporated $90 million Sagil Latin American Opportunities Fund is betting against stocks of companies that rely on consumer demand in Brazil, Mexico and Chile, according to Bradford Jones, a money manager at Sagil Asset Management. The fund has posted an 11 percent return this year, the most in its category, data compiled by Bloomberg show.

Latin America’s gross domestic product will probably grow at less than half of last year’s pace, according to estimates compiled by Bloomberg. Brazil, the region’s largest economy, slipped into a recession this year while Mexico is poised for its second consecutive year of expansion of less than 3 percent.

“Consumer stocks in Brazil don’t reflect the negative potential in 2015,” Jones said in a telephone interview from London. In Mexico “the economy has still not picked up to the point where the consumer trend has turned.”

Jones, who also said Sagil is bearish on Chilean consumer stocks, declined to identify the companies the fund is shorting. A short sale refers to the act of borrowing shares and then selling them, in a bet that the stock can be bought back later at a lower price.

Copa, Arcos

Recently-closed short sales include Copa Holdings SA (CPA:US), the parent of Panama’s Copa Airlines, and Arcos Dorados Holdings Inc., a Buenos Aires-based operator of McDonald’s Corp. restaurants, Jones said. Both stocks have tumbled more than 30 percent this year.

Sagil is bullish on Itau Unibanco Holding SA, Latin America’s largest bank by market value, amid the outlook for improving profitability. The Sao Paulo-based bank said on Nov. 4 that earnings rose 36 percent in the third quarter after boosting lending margins and banking service fees.

The fund’s other “long” bets are Brazilian education company Estacio Participacoes SA, meat exporter JBS SA, Chilean lender Corpbanca SA (CORPBANC) and Mexican real-estate investment trust Terrafina.

The MSCI Emerging Markets Latin America Index was little changed at 4:32 p.m. in New York.

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