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Wednesday, November 30, 2022

Cedears: faced with an ultra-aggressive Fed, what is best, defensive companies or ETFs?

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in the middle of this local and international adverse weatherif you think about acquiring foreign assets such as Argentine Depository Receipts (Cedears) for “escape” to the internal conjunctural problemsa key question would be to understand if it is a good time to increase exposure in this type of asset. For this reason, Ambit was in contact with market specialists, who revealed their position on the matter, and indicated what kind of Cedears would be more convenient to join a current portfolio, between companies known as defensive (those with low fluctuation level and high dividends) and ETFs (replicate indices that diversify a portfolio in a simple way).

Why buy Cedears in an international context with so much uncertainty?

Mauro Maza, Head of Research Bull Market Brokers assured that It’s not just about buying Cedearsbut of analyze the economic cycle in which the economy finds itself to choose the most appropriate assets.

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“It is always a good time to buy an asset that adjusts for the New York dollar. It is an excellent indexer of the highest currency quote in the systemwhat it is is not little”, highlighted the specialist giving an account of the importance of increasing exposure to assets that allow coverage in hard currency.

For its part, Brian Maple, analyst of capital harerecognized that “towards the end of last year, the stock markets already anticipated the rise in interest rates by the different central banks, however, The Fed’s aggressiveness over the course of 2022 completely wiped out the return left by stocks in 2021 and could trigger a global recession.”

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“However, these fears of crisis have not yet materialized in economic facts: the labor market, home purchases and consumption in North America remain at high levels despite everything and there are still businesses to be done in a interest rate hike“, plot Maple, alluding to that investments in the New York stock market are backed by the resilient US macroeconomy.

What impact would it have in the future that these Cedears are valued at the CCL dollar?

“That they are valued at CCL gives us a cushion for any eventuality in Argentina. In fact they are the only truly risk-free trading instrument in Argentina because the underlying replicates 100% assets not dependent on the regulator”held Mazza highlighting one of the most outstanding comparative advantages of the Cedears.

And he confirmed his position, stating that “even in an extreme scenario of corralito or pesification, these instruments would operate as if they were a ‘cable species or 7,000 species’ being an example in foreign local currency. In other words, they are not allowed to be pesified or confiscated by the Government.” That is why he compared the security provided by the CCL as “have a safe in Luxembourg”.

For his part, from capital hare argued that, according to what happened last month, in which the field was allowed to liquidate its harvest at the “soybean dollar” value in the middle of a adverse global contextthe “counted with liqui” remained stable on average. Even so, from October when the liquidation of agriculture would decrease and as relevant local events approachespecially in view of the political events of 2023, it would be very It is likely that there will be a resurgence of renewed investor interest in taking refuge in the CCL.

In such a volatile context: is it preferable to buy Cedears from defensive companies or from ETFs?

Since Bull Market recommended having a strategic position in a defensive sector What Pharma. “At the company level, today we are positioned in biogene (BIIB)that specializes in research and development for neural diseases; and with less proportion in Merck & Co. (MRK), dedicated mainly to the production and marketing of cancer drugs. both companies have inelastic demand which means that its products are consumed steadily to satisfy an urgent need such as health, Regardless of your income level“said the specialist.

In any case, they recognized that this could be close to exhaustion. “Right now we are taking greater exposure in ETFs rather than individual companies. Promptly we focus investments in Brazil. We see the presidential election with a potential surprise effect from Bolsonaroso we choose the ETFs called ewzwhich has in its composition mainly Petrobras (PBR) Y banks. Yes ok Lula may win, the upside is too big Yes Bolsonaro surprises”, concluded the economist.

Inversely, from Hare Capital warn that the ETFs are good instruments to diversifynevertheless, In a market that is becoming more selective every day, stocks should be incorporated into portfolios, paying attention to each company in detail, and focusing on those that have a more solid structure Y provide greater protection in a hectic international context. Those firms, the operator remarked, are the ones that distribute “juicy dividends” and turn out to be the ones who got best performance in 2022 despite the general drop in equity.

“Local investors can access a portfolio of three Cedears of foreign companies and design an attractive flow of dollarized dividend collection every month. Which we propose since capital hare is made up of 3 companies from different sectors: Johnson & Johnson (JNJ), from the pharmaceutical sector, that it would have already discounted in its price the effects of maximum values ​​of the Medicare program promoted by the United States government; Verizon Communications (VZ), of the communications sector that every day becomes more essential for network economies and for him development of 5G technology; Y Cisco Systems (CSCO), of technology industry, who arrives at this instance as one of the hardest hit, but he is the one who better recovery would have in the short term given the improvement in expectations in the financial markets“concluded Maple.

Source: Ambito

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