Like everywhere else in the world, air-travel activity in Brazil collapsed when the novel coronavirus pandemic struck.

But unlike many other countries in the world, Brazil continues to struggle with near-record numbers of new COVID infections.

To be sure, Brazilian air travel has recovered significantly from the lows of last year.

For example, one Brazilian airline reported transporting half as many passengers in the fourth quarter of 2021 as it did the prior year. However, that depressed tally was double the number of passengers it transported during the third quarter.

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Unfortunately, shortly after the start of 2021, a “second wave” of COVID cases began sweeping through Brazil… and airline travel slumped anew.

That airline responded by cutting flights. From nearly 500 flights per day in January, it slashed the number to 355 in February, and then slashed it again to 250 flights this month — equal to about 40% of the prior-year rate.

Nevertheless, there is hope.

And where there is hope there is opportunity.

So in today’s issue, let’s take a look at why I think Brazil will soon turn the corner on COVID.

Plus, I’ll show you one way to capitalize on the opportunity that hope represents…

A Case for Optimism

Although far from a certainty, the number of COVID cases in Brazil seems to be topping out.

Over the last week or so, the seven-day average of new daily COVID cases has dipped from 105,000 to 91,000.

This chart also shows that daily vaccinations have ramped up from less than 100,000 a day in January to more than half a million a day currently.

But Brazil’s vaccination efforts still trail far behind many other countries. Only 7% of the country’s population has received a COVID shot, compared to 30% in the United States

Even so, it’s a safe bet that the overwhelming majority of Brazilians over 65 will be vaccinated by the end of June, and that travel activity will be ramping up between now and then.

Obviously, more work remains. But from the perspective of the Brazilian travel industry, the country’s vaccination data is a glass-7%-full, rather than 93%-empty.

A rapidly rising vaccination rate is inevitable, which means a falling infection rate is also inevitable… which means travel activity should trend higher in the coming months.

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A second reason for hope is a macroeconomic one.

Commodity prices are soaring, which is a boon to a resources-focused economy like Brazil’s.

In fact, as the chart below shows, the trajectory of the Brazilian economy and the price trend of industrial metals usually move in lockstep with one another.

The COVID pandemic disrupted that linkage. As the right side of the chart shows, Brazilian economic growth tanked during 2020, even though industrial metals prices were soaring toward their highest levels in more than a decade.

I expect this aberration to resolve itself once the worst of the pandemic subsides. In other words, I expect the Brazilian economy to play catch-up with high-flying commodity prices.

Once sustainable growth resumes, air travel should gain a significant boost.

To be clear, the COVID pandemic is not the only risk Brazilian businesses face. There’s also the ever-present risks of Brazilian economic uncertainty and/or political turmoil.

One month ago, for example, Brazilian President Jair Bolsonaro moved to cap rising fuel prices by ousting CEO Roberto Branco of Petrobras (PBR), the national oil company. Branco had opposed the idea of fixing fuel prices.

After this heavy-handed meddling, Bolsonaro threated to “stick a finger” in the utility sector in order to cap consumer rates in those industries.

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Falling close on the heels of these news stories was the announcement that Luiz Inácio Lula da Silva (known as “Lula”), the left-wing president of Brazil in the 2000s, would be released from prison, thanks to a controversial ruling by the Brazilian Supreme Federal Court.

Lula was very popular throughout most of his decade-long presidency, but his populist policies were less-than-popular with investors.

Now that he is free, Lula could run for president once again. That is a troubling prospect for the financial markets.

These Brazil-centric risks are very real, but they are also very known. Because of them, Brazilian stocks carry much lower valuations than their U.S. counterparts.

Therein lies the opportunity…

The Right Time to Strike

I recently recommended to members of The Speculator a bullish trade on a troubled Brazilian airline company whose stock price has tumbled almost 60% since the COVID-19 pandemic struck early last year.

This airline will not likely return to profitability until the second half of this year, but from that point forward, earnings should grow rapidly. From an investment standpoint, the trend will matter more than the precise result.

A successful investment in this company relies mostly on one simple premise: The near-term future will be much less troubling than the recent past.

I believe this airline’s near-term future will include enough good news to propel the stock to significant gains. A double within 12 months is certainly possible.

And with the leveraged bullish trade I recommended, my Speculator members’ gains should be even greater.

Click here to learn how to join us.

Regards,

Eric Fry

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On the date of publication, Eric Fry did not own either directly or indirectly any positions in the securities mentioned in this article.

Eric Fry is an award-winning stock picker with numerous “10-bagger” calls —in good markets AND bad. How? By finding potent global megatrends… before they take off. In fact, Eric has recommended 41 different 1,000%+ stock market winners in his career. Plus, he beat 650 of the world’s most famous investors (including Bill Ackman and David Einhorn) in a contest. And today he’s revealing his next potential 1,000% winner for free, right here.