Stock rallies 1,000% for ‘anonymous billionaire’

BRAZIL INVESTOR

PAULA SAMBO AND JESSICA BRICE Luiz Alves Paes de Barros is something of an enigma in Sao Paulo’s financial circles. At 69, he’s known around town as the “anonymous billionaire” for quietly amassing a fortune by wagering on stocks almost no one else seemed to want.

In Magazine Luiza SA, Barros may have made one of his best bets yet.

Starting in late 2015, Barros’s Alaska Investimentos Ltda. made the battered retailer one of its biggest holdings, a brazen move in a nation stuck in the middle of its worst recession in a century. It paid off. Magazine Luiza has surged more than 1,000 per cent since reaching a record low about a year ago, making it the top stock in one of the world’s topperforming markets. That turned Alaska’s Black Master, which Barros co-manages with Henrique Bredda and Ney Miyamoto, into the No. 2 fund among 569 peers focused on Brazilian equities, according to data compiled by Bloomberg.

Barros’s latest success only adds to the intrigue surrounding one of Brazil’s most storied, but media-shy, individual investors. Early in his career, he traded commodities Luis Alves Paes de Barros has spent years investing his own cash almost exclusively in Brazilian stocks. and was a partner of star fund manager Luis Stuhlberger at what is now Credit Suisse Hedging-Griffo. Barros then spent the next half-century investing only his own cash, almost exclusively in Brazilian stocks, and regulatory filings show he personally holds 1.2 billion reais (US360 million) in equities.

When it comes to managing other people’s money, Barros is a rookie, having cofounded Alaska in July, 2015. But his investing method remains the same. He only holds a handful of stocks, favours companies with bottom-of-the-barrel valuations and usually jumps in as everyone else is bailing.

“Perfecting patience is all I’ve done over the past 50 years,” Barros says. “I love when things get bad. When it’s bad, I buy.”

During two interviews, first in Alaska’s shoebox office in the heart of Sao Paulo’s financial district and then at his personal office on the city’s oldest business thoroughfare, the silverhaired asset manager explained what drew him to Magazine Luiza and went over the stocks he likes now: Fibria Celulose SA, Braskem SA, Marcopolo SA and Vale SA.

“The market has forgotten these stocks,” he says.

Alaska started building a stake in petrochemicals maker Braskem about four months ago (the stock has surged 48 per cent since mid-August after tumbling 20 per cent this year before then) and pulpmaker Fibria a few months later. Barros likes both companies because they’re fundamentally sound and valuations are low. Braskem’s price-to-earnings ratio is 8.3, less than half the level three years ago. Fibria’s valuation is less than half the average of the past two years.

Marcopolo, a maker of trucks and buses, is a play on Brazil’s rebound from recession, while miner Vale will benefit as global investors start seeking value again over safety. There’s no economic expansion in Brazil without infrastructure investments, he says.

“Vale won’t be a disaster for anyone. When iron-ore prices rise again, Vale will fly,” he said.

If those stocks return just a fraction of what Magazine Luiza did, they’d count as stellar investments.

Alaska’s Black Master fund has returned 143 per cent in 2016, compared with a 33-per-cent gain for Brazil’s benchmark Ibovespa index.

While Alaska oversees about 1.6 billion reais, threequarters of that is Barros’s own cash. But the fund is actively seeking new clients.

Why now, after 50 years of going it alone? “Because I’m positive that the market is going to rise,” he says. outside of Ontario, which puts it at a disadvantage against rival grocers.

“In our view, Empire must strategically reassess and redesign its go-to-market strategy, improve operational execution in western Canada and reduce unnecessary costs,” the report said, adding Desjardins estimates the retail operator “has two to four years of heavy lifting ahead of it.” That could include a further downsizing of the Sobeys store network in selected regions of the country.

In its most recent quarter, Empire’s adjusted profits spiralled 70 per cent and its sales fell 2.1 per cent; at Loblaw Cos. Ltd. and Metro Inc., profits were solid and sales were up 1.4 per cent and 3.4 per cent, respectively.

The two grocers will likely benefit from Sobeys’ ongoing market share losses for at least two to three more quarters, Desjardins said.

The firm rates Metro as a buy with a 12-month target price of $46, from its closing price of $40.22 Wednesday, and Loblaw as a buy with a 12-month target price of $82, from its closing price of $70.56 on Wednesday.