Brazilian stocks saw a strong recovery in August, going up 6% on the month according to the benchmark Ibovespa index. XP Asset’s equity funds outperformed further, with returns between 8 and 9%.
According to local media outlet InfoMoney, the firm attributed the rebound to both new allocations to core positions in the portfolio, as well as macro factors such as a stabilising exchange rate, together with early indications of easing inflation.
In July, Brazilian equities had lagged behind other emerging markets, and so this performance from there came after a lag.
The so-called “tariff hike” impacted sentiment and fueled awareness for foreign capital to stay away.
That gap was partially closed in August, when the Ibovespa reversed this trend, which was positive for both fund managers and investors.
Macroeconomic and corporate concerns surface
Despite the surge, XP Asset maintained a cautious tone during its September live broadcast.
The management observed that the recent gains occurred at a time when both business sentiment and macroeconomic data were showing early signs of deterioration.
Over the last two months, both public and unlisted companies have supplied more negative input, indicating a less hopeful business environment.
At the same time, economic estimates have been revised downward, indicating a slight slowdown in GDP growth.
These events drove XP Asset to adopt a more defensive approach, which included locking in profits from stocks that had grown significantly and increasing protective measures across specific funds.
Portfolio highlights: Eletrobras, Eneva, and Itaú
The firm, which ranked utilities and financials among its biggest portfolio drivers in August. Eletrobras (ELET3) communicated its capital allocation well, gaining increased confidence from investors.
The outlook for Eneva (ENEV3) improved after the company received a positive view of the thermal power plant auction format, which was revised, thereby boosting its prospects.
In XP Asset’s portfolios, both companies received increased allocations.
Itaú (ITUB4): Banking industry highlights follow Itau’s earnings announcement. Then, good signals from the Central Bank reinforced the company’s decision to strengthen its holdings.
From the company’s perspective, consistent profitability, solid economic data, and an appealing value all combined to create a compelling investment case.
Healthcare and consumer adjustments
In healthcare, XP Asset cut its stake in Hapvida (HAPV3) after a solid second quarter.
While the market reacted positively to recent news, the manager chose to secure profits while waiting for more information on the company’s future performance.
Hypera (HYPE3) was a poorer performer in the portfolio, as the business reduced its revenue outlook.
Meanwhile, the education group Ânima (ANIM3) received pressure due to decreased marks in medical courses.
However, XP Asset maintained its position, noting that the share price decrease enhanced its confidence in the long-term investment thesis, particularly since the review procedure still needed methodological changes.
Profit-taking in infrastructure and industrials
Aside from healthcare and consumer brands, XP Asset reduced its exposure to companies that had already performed well year to date.
Positions in Sabesp (SBSP3), Vibra Energia (VBBR3), and Marcopolo (POMO4) were reduced following large gains.
While the firm acknowledged a generally positive outlook for these industries, the decision was motivated by a desire to generate benefits while preserving capital in the face of rising macroeconomic concerns.
Balancing optimism and risk
The August comeback reaffirmed Brazil’s potential to attract investors when foreign and internal conditions coincide.
Currency stability, reducing inflation, and a supportive yield curve fueled equities, and active portfolio modifications boosted XP Asset’s funds’ performance.
In this context, the strategy for XP Asset has been characterised by measured optimism tempered a tactical caution: adding to positions in strong fundamental names while cutting to a rise to exposed where valuations seem extended or risks are increasing.
The message was clear to investors. There might still be opportunity in the Brazilian equity market, but the next few months will call for increased caution, opportunistic book-take profit, and an open mind to change with macro conditions.
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