Top 10 best Brazil stocks to buy for 2011

If the Brazilian government can rein in spending and slow inflation, they may be able to head off a market sell-off and brave investors could be rewarded nicely. Here are 10 stocks poised to perform in the coming months.

While economies in the developed world are struggling to keep their heads above water, growth has been robust in pockets of the emerging world. China nabs most of the headlines, but Brazil presents a lot of opportunities for investors. Economists worry that blistering growth over the past few years can’t be sustained, but if the government there can rein in spending and slow inflation, they may be able to head off a market sell-off. Brave investors could be rewarded nicely. Here are some of my favorite play on Brazilian stocks:

Top 7 best Brazil stocks

1) Petroleo Brasileiro SA (NYSE:PBR). Combine an oil-rich company with an emerging economy, and you’ve got the potential for explosive growth. Shares in PBR are down 23 percent on the year, but they’re starting to look like a great value with a P/E ratio at 7.4 and a yield of 4.2 percent.

2) BRF Brasil Foods SA (NYSE:BRFS). Shares in Brasil Foods have rocketed up nearly 18 percent YTD, and they’re yielding another 1.78 percent on top of that. So long as wages in Brazil keep rising, consumers shouldn’t trim back cut back spending on food despite higher prices.

3) Companhia de Bebidas das Americas (NYSE:ABV). A bottling company for Pepsi, Brazil-based beverage giant Companhia de Bebidas could be one of the country’s best kept secrets. The stock’s up more than 12 percent on the year and is yielding north of 4 percent.

4) Gafisa SA (NYSE:GFA). A risky play on the Brazilian real estate market, you can’t get much bigger than Gafisa. The company operates in more than 130 cities throughout the country. Fears over the real estate market have crushed the stock this year, though, pushing it down more than 30 percent.

5) Vale (NYSE:VALE). A mining company that digs up just about anything it can get its hands on, Vale has businesses in fertilizer, aluminum, copper, coal and a host of metals. The threat of a global economic slowdown has pushed shares down 18 percent, but Vale’s now yielding north of 5 percent with P/E ratio of 5.9.

6) Banco Bradesco SA (NYSE:BBD). Brazilian banking giant Banco Bradesco has a market cap at $72 billion that nearly rivals Citigroup (NYSE:C) at $87.5 billion. Best of all, the company pays out dividends as often as three times a month for a yield over 3 percent.

7) CPFL Energia S.A. (NYSE:CPL). A utility company with a dividend of 6+ percent, CPFL is the biggest of Brazil’s electric companies to offer ADRs. CPFL serves nearly 7 million clients and has recently begun investing in renewable energy sources through a partnership with Energias Renováveis S.A.

Top 3 best Brazil ETFs

1) iShares MSCI Brazil Index ETF (NYSE:EWZ). The largest and most popular Brazil ETF tries to mirror the performance of the Brazilian stock exchange as measured by the MSCI Brazil Index. Each share in EWZ buys you exposure to a broad range of Brazilian securities. Daily volume exceeds 20+ million shares.

2) Market Vectors Brazil Small Cap ETF (NYSE:BRF). Focused on smaller, high-growth companies that do at least 50 percent of their business in Brazil, BRF can prove more volatile than its larger counterpart EWZ. But, much like the Russell 2000, when the economy is hot, small stocks tend to outperform the Blue Chips. Daily volume averages 232,000 shares.

3) ProShares Ultra MSCI Brazil ETF (NYSE:UBR). Daytraders with a good source for Brazilian news will likely pick UBR as their Brazilian ETF of choice. As an ultra ETF, it seeks to return 200 percent of the daily return of the MSCI Brazil Index. If the index goes up 5 percent, UBR should go up 10 percent. 40,000 shares change hands every day. If you’re convinced Brazil’s due for a hard landing, ProShares also offers an Ultrashort MSCI Brazil ETF (Public, NYSE:BZQ) that lets you make a leveraged bet against the country’s economy.

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Rally in gold prices could still have legs

Here are three key reasons why the bubble in gold prices isn’t quite ready to pop.

In case you haven’t noticed, the gold market is starting to feel frothy. Over the past month, the SPDR Gold Trust ETF (NYSE:GLD) has risen more than 18 percent while the Dow Jones Industrial Average has tumbled 14 percent.

In a sign of the times, the SPDR Gold Trust actually surpassed the SPDR S&P 500 ETF (NYSE:SPY) to become the world’s largest ETF yesterday (per USAToday). GLD’s now holding some $78 billion in gold in a London vault, while SPY’s holding $77 billion in paper assets.

Gold bugs have to be getting jittery, even as they watch the value of their favorite commodity scream higher. Why? Gold just might be going parabolic, and anything that goes parabolic is doomed for a collapse (no matter how short-lived).

The same thing happened six months ago in the silver market when silver prices rocketed up more than 30 percent from roughly the end of April to the end of May. A series of new silver margin requirements from the CME was widely blamed as causing silver prices to crash.

Now, investors are starting to look at their watches and guess when the same thing’s going to happen to gold. I’m not ready to be a bear yet, though, and here are three reasons why:

1) Seduced by silver prices. I was thinking gold prices were getting over-heated until I look at the chart for the iShares Silver Trust ETF (NYSE:SLV). In April, the run-up in silver prices made gold’s current spike look paltry. In the span of 30 days, silver shot up 30 percent.

By contrast, gold has risen a mere 18 percent over the past month. If bullion is indeed going parabolic, we could be right in the middle of the most powerful part of the upward thrust. We’ve got to be careful, though. Silver more than made up for its rise by giving up all its gains in five short days. That’s a plunge of 6 percent per day!

2) Margin calls anyone? The CME took the brunt of the blame for cooling the silver market after issuing a series of vicious margin hikes when the market got overheated. During a nine-day span at the end of April, CME raised silver margins by 84 percent (per the Wall Street Journal). Two weeks ago, they started in on the margin requirements for gold raising them 22 percent on Aug. 11. CME also hinted more hikes could be imminent for gold, but still, we’re a long way from the 84 percent hike we saw for gold’s white cousin.

3) Timing is everything. Gold prices will likely remain strong through the end of the week as investors await an announcement from Federal Reserve Chairman Ben Bernanke. He’s hashing over ideas with some of the world’s most powerful bankers at the annual symposium in Jackson Hole, Wyoming, right now, and he’ll make some sort of announcement on Friday morning.

Last year’s gathering brought us QEII, of course, and some are betting there’s going to be even more quantitative easing on the horizon as the banking elite look for ways to keep the ship afloat. If that happens, expect lots of fireworks in the financial markets. I’m just not sure if it’s going to be good for gold, but I know better than to argue with a trend until its broken. Friday might be the breaking point, but I’m at least bullish until then. And if gold prices do indeed fall, I’ll look for ways to add more to my portfolio in the rocky months to come.

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How to short bonds with ETFs before the collapse

Betting against bonds and the dollar could be one of the few prudent investments we have left. Here’s a list of the best short bond ETFs that will help you do just that.

The chairs on the Titanic will soon be rearranged. On June 30, the Federal Reserve is slated to end QE2. No longer will it be the primary buyer of U.S. debt. If foreign investors, mutual funds and banks don’t step in to fill the void, bond prices could fall quickly and yields could skyrocket in the face of rising inflation and record debt levels at the Treasury.

Just last week, we learned that Bill Gross, the founder of Pacific Investment Management Co. (better known as PIMCO), bet against the U.S. Treasurys market with short positions taken up in February. That’s a big vote of no confidence in U.S. debt as PIMCO manages world’s biggest bond fund.

You can do the same with a variety of short bond ETFs. Here’s a list of the most popular short bond ETFs. Keep in mind that long-term bonds (20+ years) are generally the most sensitive to inflation, and therefore will likely perform the best in the event of a bond market crash. All of the ETFs listed below are leveraged except for TBF. Direxion’s Treasury Bear ETFs are leveraged 300 percent:

ProShares UltraShort 7-10 Year Treasury ETF (NYSE:PST)
Volume: 158,000

ProShares UltraShort 20+ Year Treasury ETF (NYSE:TBT)
Volume: 15.7 million

ProShares Short 20+ Year Treasury ETF (NYSE:TBF)
Volume: 490,000

Direxion Daily 10-Year Treasury Bear 3X Shares (NYSE:TYO)
Volume: 39,000

Direxion Daily 30-Yr Treasury Bear 3X Shares (NYSE:TMV)
Volume: 1.1 million

In Bill Gross’ words, government debt and entitlements will undermine the dollar in the years to come. “Unless entitlements are substantially reformed, the U.S. will likely default on its debt; not in conventional ways, but via inflation, currency devaluation and low to negative real interest rates,” he writes at Pimco.com. Until we see change in Washington, betting against bonds and the dollar could be one of the few prudent investments we have left.

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Full list of VIX ETFs

A large spike in the VIX usually indicates investors are nervous about the near-term performance of the biggest stocks in the S&P 500. During last May’s “flash crash,” for example, the VIX spiked to 45. The VIX’s two-year average is around 25. Research this list of VIX ETFs to capitalize on that volatility.

How does the VIX work?

The CBOE Volatility Index is more commonly known as the VIX or the “fear gauge.” When investors get nervous about the market, the Volatility Index reflects that fear by measuring the market’s expectations of near-term volatility conveyed by S&P 500 options prices. The more fear that’s out there, the more churn there is in options prices. A large spike in the VIX usually indicates investors are nervous about the near-term performance of the biggest stocks in the S&P 500.

During last May’s “flash crash,” for example, the VIX spiked to 45. The VIX’s two-year average is around 25, according to Barron’s.

Full list of VIX ETFs and ETNs (ranked by volume)

iPath S&P 500 VIX Short-Term Futures ETN (NYSE:VXX), average volume 19.9 million: Offers a daily long position in VIX futures contracts that are designed to reflect the implied volatility of the S&P 500 Index. The index is considered a short-term futures ETN since contracts roll continuously throughout each month from the first month VIX futures contract into the second month VIX futures contract. Specifically, the focus is on volatility that is expected to occur over the next 30 days.

iPath S&P 500 VIX Mid-Term Futures ETN (NYSE:VXZ), average volume 746,000: VXZ operates similarly to VXX, but instead of rolling futures contracts from the first month into the second month, VXZ rolls contracts from the fourth month into the seventh month. The focus isn’t so much on volatility in the current month, but rather on volatility a few months down the road. VXZ tends to be slightly less volatile than VXX.

VelocityShares Daily 2x VIX Short Term ETN (NYSE:TVIX), average volume 157,800: TVIX seeks a yield that’s twice (2X) the daily performance of the S&P 500 VIX Short-Term Futures Index. The moves in the VIX should be compounded 100 percent by TVIX. It’s leveraged fear at its best.

ProShares VIX Short-Term Futures ETF (NYSE:VIXY), average volume 45,500: VIXY is linked to the performance of the S&P 500 VIX Short-Term Futures Index.

ProShares VIX Mid-Term Futures ETF (NYSE:VIXM), average volume 6,400: VIXM is linked to the performance of the S&P 500 VIX Mid-Term Futures Index.

iPath Long Enhanced S&P 500 VIX Mid Term Futures ETN (NYSE:VZZ), average volume 6,400: VZZ is linked linked to a leveraged return (2X) on the performance of the S&P 500 VIX Mid-Term Futures Index.

VelocityShares Daily Long VIX Short Term ETN (NYSE:VIIX), average volume 2,150: VIIX is linked to the daily performance of the S&P 500 VIX Short-Term Futures Index.

VelocityShares Daily 2x VIX Medium Term ETN (NYSE:TVIZ), average volume 1,345: TVIZ is linked to twice (2x) the daily performance of the S&P 500 VIX Mid-Term Futures Index. I’d stick to an ETN with a much higher trading volume so you can move in and out of your position quickly.

VelocityShares Daily Long VIX Medium Term ETN (NYSE:VIIZ), average volume 100: VIIZ is linked to the daily performance of the S&P 500 VIX Mid-Term Futures Index. Like TVIZ, anemic trading volume makes me want to turn around and run from VIIZ – no matter how volatile the futures market is.

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Top 5 best ways to short the dollar

Here are five simple ways to bet against the dollar; from opening a savings account in a foreign currency to investing in precious metals or American Blue Chip stocks.

1) ETFs. Perhaps the easiest way to bet against the dollar is by investing in an inverse dollar ETF. The PowerShares US Dollar Index Bearish ETF (NYSE:UDN) is the best in class with a daily trading volume around 156,000 shares. UDN shorts futures contracts as it tries to track the Deutsche Bank Short US Dollar Index (USDX) Futures Index. A better option, though, might be shorting an ETF that’s long the dollar in the form of UDN’s sibling, the PowerShares DB US Dollar Index Bullish ETF (NYSE:UUP). UUP has a trading volume that’s 16 times higher than UDNs, and some sources argue shorting long ETFs is a better strategy than going long short ETFs.

2) Buy gold. Since the supply of gold is relatively stable, the precious metal’s price tends to behave independently of the actions at the Fed’s printing press. If the value of the dollar goes down, gold prices can stay the same, but it’ll still take more dollars to buy the same amount of gold. Throw increased investor demand for gold into the mix when inflationary fears are building in the economy, and you’ve got a recipe for surging gold prices.

3) Convert your dollars to yuan. The Chinese government has loosened the strings it has the yuan of late, finally allowing allowing Americans to open yuan savings accounts directly in the U.S. The Bank of China branches in New York and L.A. allow investors to save cash in the form of renminbi (deposit up to $20,000 a year). Kiplinger also recommends checking out EverBank, which offers savings accounts in 20 foreign currencies (provided you pay a 0.75 percent transaction fee when you buy and sell currencies). Accounts can be started with as little as $2,5000.

4) Invest in multinational Blue Chips. While companies like tractor-manufacturer Deere & Company (NYSE:DE), The Coca-Cola Company (NYSE:KO) and software company Oracle Corporation (NASDAQ:ORCL) are all headquartered in the U.S., they derive significant portions of their income overseas. In the case of Oracle, 70 percent of the company’s revenues come from business outside of the U.S. Not only does these investments give you exposure to emerging economies, they hedge your exposure to the dollar while paying a modest dividend.

5) Invest directly in foreign companies. In the tech realm, the Chinese market operates behind what’s been dubbed The Great Firewall. American tech companies can’t get in, and a lot of the country’s biggest tech companies aren’t yet trying to capture audiences outside the domestic market. That means growth in your investment is unmoored from the performance of the dollar. In tech, consider SINA Corporation (NASDAQ:SINA), the maker of a Twitter-like microblogging service called Weibo. China’s financial markets has a new player in wealth management company Noah Holdings Limited (NYSE:NOAH) and the Chinese advertising industry looks like it’s led by Focus Media Holding Limited (NASDAQ:FMCN). There are also numerous plays in China’s solar industry from JA Solar Holdings Co., Ltd. (NASDAQ:JASO) to Trina Solar Limited (NYSE:TSL) to name a few.

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Full list of ProShares ETFs

Here’s a full list of ProShares ETFs that are currently trading on U.S. exchanges.

Who knew the total number of ProShares ETFs? There are 99 in all, and here’s a full list of ProShares ETFs as of May 31, 2010:

Ultra MarketCap
ProShares Ultra QQQ (ETF) NYSE:QLD
ProShares Ultra Dow30 (ETF) NYSE:DDM
ProShares Ultra S&P500 (ETF) NYSE:SSO
ProShares Ultra Russell3000 NYSE:UWC
ProShares Ultra MidCap400 (ETF) NYSE:MVV
ProShares Ultra SmallCap600 (ETF) NYSE:SAA
ProShares Ultra Russell2000 (ETF) NYSE:UWM
ProShares UltraPro QQQ (ETF) NASDAQ:TQQQ
ProShares UltraPro Dow30 (ETF) NYSE:UDOW
ProShares UltraPro S&P 500 (ETF) NYSE:UPRO
ProShares UltraPro MidCap400 (ETF) NYSE:UMDD
ProShares UltraPro Russell2000 (ETF) NYSE:URTY
Ultra Style
ProShares Ultra Russell1000 Value (ETF) NYSE:UVG
ProShares Ultra Russell1000 Growth (ETF) NYSE:UKF
ProShares Ultra Russell MidCap Value (ETF) NYSE:UVU
ProShares Ultra Russell MidCap Growth (ETF) NYSE:UKW
ProShares Ultra Russell2000 Value (ETF) NYSE:UVT
ProShares Ultra Russell2000 Growth (ETF) NYSE:UKK
Ultra Sector
ProShares Ultra Basic Materials (ETF) NYSE:UYM
ProShares Ultra Consumer Goods (ETF) NYSE:UGE
ProShares Ultra Consumer Services (ETF) NYSE:UCC
ProShares Ultra Financials (ETF) NYSE:UYG
ProShares Ultra Health Care (ETF) NYSE:RXL
ProShares Ultra Industrials (ETF) NYSE:UXI
ProShares Ultra KBW Regional Banking (ETF) AMEX:KRU
ProShares Ultra Nasdaq Biotechnology (ETF) NYSE:BIB
ProShares Ultra Oil & Gas (ETF) NYSE:DIG
ProShares Ultra Real Estate (ETF) NYSE:URE
ProShares Ultra Semiconductors (ETF) NYSE:USD
ProShares Ultra Technology (ETF) NYSE:ROM
ProShares Ultra Telecommunications (ETF) NYSE:LTL
ProShares Ultra Utilities (ETF) NYSE:UPW
Ultra International
ProShares Ultra MSCI EAFE (ETF) NYSE:EFO
ProShares Trust ProShares Ultra MSCI Emerging Markets (ETF) NYSE:EET
ProShares Ultra MSCI Europe (ETF) NYSE:UPV
ProShares Ultra MSCI Pacific ex-Japan (ETF) NYSE:UXJ
ProShares Ultra MSCI Brazil (ETF) NYSE:UBR
ProShares Ultra FTSE/Xinhua China 25 (ETF) NYSE:XPP
ProShares Ultra MSCI Japan NYSE:EZJ
ProShares Ula MSCI Mexico Investable Market (ETF) NYSE:UMX
Ultra Fixed-Income
ProShares Ultra 7-10 Year Treasury (ETF) NYSE:UST
ProShares Ultra 20+ Year Treasury (ETF) NYSE:UBT
Short MarketCap
ProShares Short QQQ (ETF) NYSE:PSQ
ProShares Short Dow30 (ETF) NYSE:DOG
ProShares Short S&P500 (ETF) NYSE:SH
ProShares Short MidCap400 (ETF) NYSE:MYY
ProShares Short SmallCap600 (ETF) NYSE:SBB
ProShares Short Russell2000 (ETF) NYSE:RWM
ProShares UltraShort QQQ (ETF) NYSE:QID
ProShares UltraShort Dow30 (ETF) NYSE:DXD
ProShares UltraShort S&P500 (ETF) NYSE:SDS
ProShares UltraShort Russell3000 NYSE:TWQ
ProShares UltraShort MidCap400 (ETF) NYSE:MZZ
ProShares UltraShort SmallCap600 (ETF) NYSE:SDD
ProShares UltraShort Russell2000 (ETF) NYSE:TWM
ProShares Trust UltraPro Short QQQ (ETF) NYSE:SQQQ
ProShares UltraPro Short Dow30 (ETF) NYSE:SDOW
ProShares UltraPro Short S&P 500 (ETF) NYSE:SPXU
ProShares UltraPro Short MidCap400 ETF NYSE:SMDD
ProShares UltraPro Short Russell2000 ETF NYSE:SRTY
Short Style
ProShares UltraShort Rusell1000 Value (ETF) NYSE:SJF
ProShares UltraShort Russell1000 (ETF) NYSE:SFK
ProShares UltraShort Russell MidCap Value (ETF) NYSE:SJL
ProShares UltraShort Rusell Midcap Growth (ETF) NYSE:SDK
ProShares UltraShort Rusell2000 Value (ETF) NYSE:SJH
ProShares UltraShrt Rusell2000 Growth (ETF) NYSE:SKK
Short Sector
ProShares Short Basic Materials ProShares NYSE:SBM
ProShares Short Financials (ETF) NYSE:SEF
ProShares Short KBW Regional Banking (ETF) NYSE:KRS
ProShares Short Oil & Gas (ETF) NYSE:DDG
ProShares Short Real Estate ProShares (ETF) NYSE:REK
ProShares UltraShort Basic Materials (ETF) NYSE:SMN
ProShares UltraShort Consumer Goods (ETF) NYSE:SZK
ProShares UltraShort Consumer Services (ETF) NYSE:SCC
ProShares UltraShort Financials (ETF) NYSE:SKF
ProShares UltraShort Health Care (ETF) NYSE:RXD
ProShares UltraShort Industrials (ETF) NYSE:SIJ
ProShares UltraShort Nasdaq Biotech (ETF) NYSE:BIS
ProShares UltraShort Oil & Gas (ETF) NYSE:DUG
ProShares UltraShort Real Estate (ETF) NYSE:SRS
ProShares UltraShort Semiconductors (ETF) NYSE:SSG
ProShares UltraShort Technology (ETF) NYSE:REW
ProShares UltraShort Telecom (ETF) NYSE:TLL
ProShares UltraShort Utilities (ETF) NYSE:SDP
Short International
ProShares Short MSCI EAFE (ETF) NYSE:EFZ
ProShares Short MSCI Emerging Markets (ETF) NYSE:EUM
ProShares Short FTSE Xinhua China 25 NYSE:YXI
ProShares UltraShort MSCI EAFE (ETF) NYSE:EFU
ProShares UltraShrt Mrkt (ETF) NYSE:EEV
ProShares UltraShort MSCI Europe (ETF) NYSE:EPV
ProShares UltraShort MSCI Pacific ex-Japan NYSE:JPX
ProShares UltraShort MSCI Brazil NYSE:BZQ
ProShares UltraShort FTSE/Xinhua China 25 (ETF) NYSE:FXP
ProShares UltraShort MSCI Japan (ETF) NYSE:EWV
ProShares UltraShort MSCI Mexico (ETF) NYSE:SMK
Short Fixed-Income
ProShares Short 20+ Year Treasury (ETF) NYSE:TBF
ProShares UltraShort 7-10 Year Treasury (ETF) NYSE:PST
ProShares UltraShort 20+ Year Treasury (ETF) NYSE:TBT
Alpha ProShares
ProShares Credit Suisse 130/30 (ETF) NYSE:CSM

Source: ProShares Annual Report, May 31, 2010