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BRAZIL’S MAG 7: LESS SILICON, MORE SAMBA

Everyone has heard of Wall Street's Magnificent Seven, but BofA equity strategists are now betting on a set of growth stocks in Brazil.

David Beker, LatAm equity strategist at Merrill Lynch, BofA said Brazil's Magnificent Seven are those with the strongest combination of growth, scale, and profitability.

The brokerage also upgraded Brazilian stocks to "overweight" in its portfolio, saying that the country is positioned for a deep easing cycle, potentially beginning as early as the first quarter of 2026.

The broader shift to emerging markets that are less exposed to U.S. tariffs helped Brazilian equities .BVSP jump 51% in U.S. dollar terms last year, marking its biggest annual jump since 2016, and is up 10% so far this year.

In comparison, the broader MSCI benchmark .MSCIEF gained 30% last year and is up 12% this month.

Unlike it's north-American cousin, BofA's Brazilian bucket is not heavily exposed to tech and includes e-commerce company MercadoLibre MELI34.SA MELI.O, lenders Nubank NU.N, Itaú ITSA4.SA and BTG Pactual BPAC3.SA, electrical company WEG WEGE3.SA, pharma retailer Raia Drogasil RADL3.SA and car rental company Localiza Rent a Car RENT3.SA.

BofA says that since 2021 the group of stocks have outperformed the Central Bank's Selic rate, the benchmark equities index .BVSP and the U.S. magnificent 7 ex-Nvidia in dollar total returns terms.

But similar to the cousin, Brazil's Mag 7 represents roughly 31% of the MSCI Brazil index (excluding MELI).dMIBR00000PUS, compared to the U.S. Mag 7 accounting for about 35% of the S&P 500 .SPX, said the brokerage.

BofA also classified a group of value stocks called 'Brazil's Unforgettable 7' comprising of mature large caps such as mining giant Vale VALE3.SA, Petrobras PETR3.SA and Bradesco BBDC3.SA.

Local elections later this year will be pivotal for Brazilian equities, set against a broader right-wing tide across the region.

The U.S. Magnificent 7 group of stocks was first coined by BofA's global strategist, Michael Hartnett in 2023.

(Johann M Cherian)

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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)