Frank,
We must remember that the credit situation in Brazil is much different
than in the US. Vitech has been able to maintain a 0.5% default rate.
The Brazilian national rate is about 4%. But what makes this so impressive
is that consumer credit in Brazil ranges from 40-70%, compared to
5-20% here. American consumers are actually much worse, considering
our current credit card default rates in excess of 5% and a record
number of personal bankruptcies.
In addition, customers provide Vitech with post-dated checks at the time
of purchase for the entire sale. Writing a bad check in Brazil is a
criminal offense that can land a careless consumer into debtor's prison.
Now there's an incentive to maintain good credit!
Now as to the long-term health of Brazil's economic and political scene,
you're guess is as good as mine, but I think the demographics are very
strong. (Almost 2/3 of the population is under 30, and few own computers.)
On a personal level, I have held this stock since early March. After a
nail-biting correction, I did take some profit at 18, and sold the rest at
the open on June 23. Yes, that's the day it opened at 11 7/8. I expected
a gap down, but not that far, of course. I actually managed to pick up a
few more shares than I previously held, and at a lower price, so came out
ahead, although barely.
Bottom line, although it's tempting to take profits again, I just look at
Dell's chart 10 or so years back and think, "Someone is kicking himself
for grabbing a 20% profit." With the acquisition of Microtech, the
deals with Microsoft and Intel, and the great tax breaks Vitech is getting
from Brazil's government, I think that the sky's the limit here.
Expect to see some resistance at the 18-20 level where it was bid up so
quickly last month, but with an earnings multiple as low as we have, I'm
VERY LONG on this baby stock.
Best of luck,
Tom |
