14 August 2014 at 7:50 GMT
- Emerging market equity picks model outperforms MSCI Emerging Market Index
- Fifth straight week outperformed MSCI
- Brazilian oil major Petrobras leads charge with 12-month return forecast of 20%
By Peter Garnry
Our model raises Brazilian oil major Petrobras to top equity pick in emerging markets with a 12-month return forecast of 20%. Despite the 9% decline in Brent crude prices since the peak in June, prices are still around the long-term averages from 2012.
Bullish outlook on growing production
The main driver behind the model bullish outlook for Petrobras is the attractive valuation on forward EV/EBITDA and above average industry growth driven by growing production.
The latest figures from July confirmed the underlying positive development in Petrobras' oil production with domestic production up 2% month-on-month. The high expected growth in production is illustrated by consensus estimates expecting negative free cash flows for the next three years.
Another week with alpha
Our portfolio of emerging market equity picks is up 1.3% the past week with the MSCI Emerging Market Index down 1.3%. The strong performance was driven by gains in Empresas CMPC (+6.4%), Ultrapar (+4.8%) and America Movil SAB (+4.8%).
As a result of the past week's results, our emerging market portfolio has outperformed the benchmark for five straight weeks. The portfolio is up 8.6% since inception compared to 0.5% for the MSCI Emerging Market Index.
-- Edited by Martin O'Rourke