Squadra sees cheap exchange rates, buys more MELI and XP and cuts short sales at IRB, Nubank and Aeris

Squadra sees cheap exchange rates, buys more MELI and XP and cuts short sales at IRB, Nubank and Aeris

In a letter published on Saturday, Squadra Investimentos said the exchange was “cheap,” and that it took advantage of the internal collapse in valuations to buy more Mercado Livre and XP, as well as cut its once big shorts on IRB, Nubank and Aeris. drops.

Guilherme Aché’s director said the 12-month P/E ratio for its 20-share portfolio was 10.6x at the end of June. Assuming the portfolio has remained the same since 2018, the average multiplier was 16.9 times in the period. The squeeze happened in just one year: at the end of June 2021, the portfolio multiplier was 16.7 times.

Squadra said valuations and net margins of companies tied to the local economy are below the historical average.

“This does not mean that it will not fall further in the short term, or that it will rise next year,” the letter read. “However, it is a key element that future returns will be better than they have been in the recent past.”

At this juncture, Squadra bets on Mercado Livre and XP among the main positions in its chests. “These are the companies that are among the best deals available on the stock exchange and whose prices have fallen dramatically in the last year.”

Squadra said it terminated its position at MELI in the second half of 2021 due to “unease with evaluationwhich seems to put as much value on a part of the business (fintech) as we are less built than the core business in the market.” After the stock fell more than the portfolio average, Squadra bought the stake again.

The manager also boosted his XP position – which was really important in the portfolio – after a 55% drop in the past 12 months.

Squadra also maintains its positions in PetroRio and Petrobras, but notes that net margins for the commodities segment remain high (and thus subject to a sudden reversal), and when it comes to commodities it is always “closer to the door, reassessing the probabilities of different scenarios and using price fluctuations more frequently.” It is usual to enter and exit positions.


Since last year, the Squadra fund has only long underperformed the major stock market indices – long-biased strategy, thanks to its short positions, has fallen below Ibovespa in this period.

In the 12 months through June 30 of this year, Squadra Long-Only is down 33.2% versus the stock market’s down 22.3%.

The Squadra Long-Biased lost 21.5% in the period, compared to a 17% increase in its benchmark, defined as IPCA + 5.2%, for 2022.

In addition to the impact of higher interest rates on the exchange, Squadra said its performance was affected because it made “more mistakes than I wanted.” He gives as an example Natura & Co.

The director said she stuck to the central premise of success turn around At the same time, other brands continued to do well – failing to thoroughly test alternative scenarios and realizing that the company had reached prices that gave little margin of safety for disappointments and results that fell short of expectations.

“When we think about where we failed in this investment, our most reasonable hypothesis is that the errors started with some kind of group thinking” [quando investidores formam um consenso sem um raciocínio crítico ou avaliação das consequências ou alternativas]The message says.

Squadra reduced its investment in Natura, despite the sharp decline in the shares; “There are better options in terms of risk and return in the stock market.”

The director also said that she has ruled out positions in two of her recent IPOs, without naming names. Always highly critical of IPOs and information asymmetry in these processes, Squadra once again said it was a mistake to assess that building small positions in start-ups would mitigate risks.

“Although we have been careful when analyzing a large number of companies that have gone public in recent years, time has shown us that our skepticism should have been (much) greater.”


In the short portfolio, Squadra said that after related gains in the first half, it reduced its short positions in IRB and Nubank; As well as in Aeris Energy, an acronym that the director revealed in the letter.

After considering the Aeris IPO in November 2020, Squadra disagreed with the high expectations of profitability and growth for a seemingly arbitrated deal.

The value of the equity before the offer of 172 million Rls was also drawn to the director’s attention, which raised doubts about the barriers to entry and the possibility of its recurrence.

The IPO was priced at multiples of 20 times pre-book value, “rarely seen in companies with industrial commodity profiles.” Two months into the show, the stock is up 132%, and Squadra set up a short position.

“Despite the indisputable expansion potential of wind energy in the world, we saw an excess of optimism by analysts regarding Aeris growth. We were faced with a forecast of domestic demand that ignored the situational impact of ending wind source subsidies, which diverged squarely from the scenario they saw Energy Research Corporation (EPE) at its launch of the Brazilian Electricity System”.

A few months later, the outlook revision came, after margins pressured and the company’s growth fell short of expectations.

Aeris stock is down 65% in the past 12 months.

Anna Paula Ragazzi

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