| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
| 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 | - | Analysis of Brazilian capital markets over 15 years reveals only 15% of equities created value above NTN-B + 3%, suggesting a poorly functioning market with… |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
Capital MarketsExchanges operate as essential high-margin toll roads for the economy with immense operating leverage. They benefit from trading volume flowing directly to profits with minimal extra cost and have natural inflation hedging through transaction values. |
Exchanges Nasdaq CBOE Trading Fees Market Data |
E-commerceSeveral investments in e-commerce leaders across Asia and Latin America, including MercadoLibre, Sea Limited and Alibaba, faced a more competitive operating environment during the period. As long-term investors, SGA observes that competitive intensity in these markets tends to ebb and flow over shorter time horizons, with market leaders typically emerging from such periods with strengthened strategic positions given inherent network effects. |
Marketplaces Competition Network Effects Asia Latin America | |
Energy TransitionThe portfolio maintains significant exposure to electrification themes through companies like Bloom Energy, which provides clean, reliable power solutions for AI data centers. The energy transition represents a structural opportunity as companies race to build power infrastructure to support growing electricity demands from AI workloads. |
Electrification Clean Energy Power Generation Fuel Cells Grid Infrastructure | |
UtilitiesThe utilities sector led returns in Q4 2025, with SSE delivering strong performance supported by its upgraded investment plan and improved visibility across regulated earnings and renewable infrastructure growth. The portfolio maintains an 8.9% allocation to utilities, representing a +5.3% overweight versus the benchmark. |
Regulated Utilities Renewable Infrastructure Investment Plan Earnings Visibility Infrastructure |
| 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. |
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