Brazil Value Talks: Pedro Poncinelli
Multiplied Invested Capital by 2x in 5 Years
Today I have the pleasure of interviewing Brazilian investor Pedro Poncinelli.
From December 2019 to February 2025 his historic performance will be the envy of anyone.
His portfolio returned more than 107.88% in the period, versus 12.14% for Ibovespa.
He multiplied the invested capital by 2x!
This guy knows how to generate real value.
Shall we meet him?
BS: Ponça, could you tell us a little about yourself?
PP: I've been interested in the stock market and the market since I was 14. I remember listening to the quotes on CBN every day, I remember Joesley Day. At 15, my father gave me the mission of managing a good amount of money, 6 figures, so I was forced to study so as not to screw up. As time went by, my confidence grew until I was practically managing everything on my own at 18. In 2021, I opened a club that is still active today. In 2023, I bought a management company, LAV, but I realized that operating in a physical location or club is much better than paying 10k/month for a fund with shares to exist. Today, I'm joining a multi-family office here in BH, called MultiWealth.
BS: What is your strategy for making money on the stock market?
PP: I like to operate on the obvious, without complicating things too much. For example: historically, Petro ON trades at a premium in relation to PN, sometimes the premium goes to zero. Very simple. I like to explain my theses to my friends who are in other areas. If they understand, it is an excellent sign. I like cheap funding. I have made a lot of money selling AmBev, Raia Drogasil, Vivo. Many companies on the stock exchange lose to the CDI. Taking advantage of this carry can be very healthy for the portfolio, of course, in the right size and with a company with the right beta.
BS: What is your process for finding a new buy opportunity? What filters do you use?
PP: New opportunities often come from other investors in the ecosystem you participate in, for example, on Twitter or WhatsApp groups. I have a watchlist with everything I consider “buyable” and I often read the results and presentations of some of them; every now and then something interesting comes up. Those who look for it, find it.
BS: How do you value a share: DCF, Multiples, implied IRR, a mix of the previous ones, …?
PP: The valuation method will depend on the type of company, but I like DCF, IRR, NAV.
BS: How do you like to build your stock portfolio, considering the number of companies, sectors and concentration?
PP: At most, 2 per sector, usually a top pick and a more ugly duckling, the best combination. Never more than 12 stocks, because I can't follow more companies than that in depth. I always like to have enough liquidity, so shorts come in to finance the longs. Currently, half of my long positions are financed by shorts.
BS: How often do you like to rebalance your portfolio?
PP: Changes in the portfolio depend more on the market than on me. I have spent more than a month without trading and I have also traded weekly. The higher the volume, the more trades.
BS: How long on average do you hold a position in your portfolio?
PP: This varies a lot, but I would say that the average time a company remains in the portfolio is 2 years.
BS: Do you believe that graphical analysis, together with fundamental analysis, can help with the buying and selling points of stocks?
PP: I believe in graphical analysis as a self-fulfilling prophecy. It happens because people believe it will happen. But I won't deny that sometimes I find one or another graph beautiful haha...
BS: What are your favorite sectors on the Stock Exchange? And the ones you avoid? Why?
PP: Construction, agricultural chain, banks, real estate and oil. I avoid retail, because I don't know how to analyze this type of company, as well as airlines and tech. These sectors are well-known for destroying value, so there's no need to waste time looking. There's always something better. (Tech Brasil)
BS: Do you use derivatives? What is your strategy?
PP: I use it. Whenever the Ibov volatility drops a deviation, I buy some puts.
BS: What is the cheapest company on the stock market today?