| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | 0% | 0% |
| 2025 | 2024 | 2023 | 2022 | 2021 | 2020 |
|---|---|---|---|---|---|
| 46.5% | -20.2% | 17.5% | 0.9% | -19.3% | 17.3% |
Sharp Capital's 15-year analysis of Brazilian equity markets reveals that only 15% of companies created value above risk-free returns plus 3%, highlighting a poorly functioning market with excessive cost of capital. Three companies stood out as exceptional value creators: Mercado Livre, Equatorial, and WEG, each demonstrating the three pillars of success: high-quality businesses, outstanding operational execution, and exemplary capital allocation. Mercado Livre's bold decision to offer free shipping in 2017 initially hurt profits but created lasting competitive advantages. WEG's countercyclical acquisition of transformer manufacturers during an unfavorable period positioned it perfectly for the energy transition boom. Equatorial demonstrated patient capital allocation, adapting its strategy when utility privatizations were delayed, then capitalizing on attractive acquisitions in 2018. The fund delivered 46% returns in 2025, outperforming benchmarks after a challenging 2024. Looking forward, the manager emphasizes that identifying future value-creation stories while avoiding the 20% of companies that historically collapse remains the critical challenge for investment success.
Value creation in Brazilian capital markets requires three essential pillars: exceptionally high-quality businesses, outstanding operational execution, and exemplary capital allocation, with the most successful companies demonstrating adaptability, patience, countercyclical thinking, ownership mindset, and disciplined decision-making.
The letter emphasizes the critical importance of identifying the next 15 years' greatest value-creation stories in Brazilian capital markets, noting this is the most important question for their day-to-day work. The manager expresses confidence that studying historical patterns of value creation and destruction will assist in both detecting great value-creation stories in the making and recognizing potential collapse scenarios.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 19 2026 | 2025 Q4 | ABEV3.SA, AMER3.SA, BPAC11.SA, CASN3.SA, EQTL3.SA, GFSA3.SA, GOLL4.SA, ITUB4.SA, MELI, NU, OIBR3.SA, PRIO3.SA, SEER3.SA, UGPA3.SA, WEG.SA | Brazil, Capital Allocation, E-Commerce, Industrial, long-term, Utilities, value creation | - | Sharp Capital's 15-year Brazilian market analysis shows only 15% of companies created real value, with Mercado Livre, Equatorial, and WEG standing out through superior capital allocation and execution. The fund rebounded 46% in 2025 after maintaining conviction through 2024's downturn. Success requires identifying exceptional businesses with patient, adaptable management teams focused on long-term value creation over short-term metrics. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIManager believes AI valuations are in a speculative bubble driven by circular investments and unsustainable capex. While acknowledging AI's transformative potential, they argue most value will accrue to consumers rather than producers due to commoditization and competition. They compare the current AI boom to historical railroad and fiber buildouts that ended in oversupply and investor losses. |
Artificial Intelligence Valuations Commoditization Capex Competition |
ValuationsUS equity valuations are at perilous highs with S&P 500 forward P/E at 23x and CAPE near 40x. The manager highlights extreme concentration in overvalued mega-cap stocks and warns that investors are applying peak multiples to peak earnings in a deteriorating institutional environment. They contrast this with much more attractive valuations in international markets. |
P/E Ratios CAPE Concentration International Risk Premium | |
Institutional PolicyThe manager expresses deep concern about the erosion of American institutions under the current administration, including attacks on rule of law, corruption, and the undermining of technocratic expertise. They argue this institutional decay threatens the foundations that have historically justified premium valuations for US assets and could lead to capital flight. |
Rule of Law Corruption Technocracy Institutions Governance | |
InternationalThe manager is positioned in international equities which significantly outperformed US markets in 2025. They highlight attractive valuations in Europe, Japan, and emerging markets, with Latin America trading at only 10x forward earnings versus 23x for the S&P 500. This represents one of the widest valuation gaps in modern history. |
Europe Japan Emerging Markets Latin America Valuation Gap | |
CryptoThe manager views cryptocurrency as part of the current speculative mania, citing examples like Dogecoin reaching a $60 billion market cap despite being created as a joke with no use cases. They also criticize the circular nature of crypto investments and the corruption surrounding Trump's crypto ventures, viewing the space as emblematic of broader market excess. |
Speculation Dogecoin Corruption Market Excess Bubble |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| No Elevator Pitches found | ||||||||||
| TICKER | COMMENTARY |
|---|---|
| EQTL3.SA | Equatorial in early 2025, when shares traded at a real IRR above 14%. At those levels, the valuation did not reflect any meaningful growth from the concessions the company operated, nor the potential for value creation through future capital allocation. The asymmetry was driven by the fact that the implied return was already elevated. |
| MELI | E-commerce Volatility: turbulence in our e-commerce portfolio companies, Sea Ltd (Southeast Asia) and MercadoLibre (Latin America), amidst aggressive price wars. |
| NU | Since our mid-year update, Nubank's shares increased 37%, bringing full-year performance to +63%. This performance has been driven primarily by fundamentals, with earnings growing approximately 42% over the same period. Brazil remains a powerful profit engine, with high customer engagement, improving risk-adjusted returns, and expanding penetration across consumer and SME banking. Mexico continues to emerge as the next major growth vector: customer penetration has reached ~14% of the population. |
| PRIO3.SA | On the negative side, the main detractor was the investment in PRIO. |
| SEER3.SA | We would also highlight the performance of Serena, which concluded its trajectory as a public company by accepting a take-private offer. |
| WEG.SA | WEG used the past decade to acquire a series of transformer manufacturers. The sector was so out of favor during that period that ABB, then the world's largest manufacturer, sold its operation on the grounds that the segment was mature, with no growth and low margins. |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
|---|---|---|---|---|---|---|
| No Recent Sells Data | ||||||
| Industry | Prev Quarter % | Current Quarter % | Change |
|---|---|---|---|
| No industry data available | |||
