- The consistency of profits in the last 5 quarters (not just annual profit)
- Comparison with the Brazilian industry average (not global)
- The impact of the current Selic rate (8.5% in 2025) on relative valuation
- The recurrence and quality of profits (eliminating non-recurring effects)
Investing in cheaper stocks can be an effective strategy for building long-term wealth, especially in the volatile Brazilian market. This comprehensive handbook offers an in-depth analysis of the current scenario, evaluation methods, and specific opportunities that can help both beginners and experienced investors make more informed decisions.
Cheapest stocks in Brazil: real opportunities or illusion?
The Brazilian market in 2025 offers a particular scenario for investments in cheaper stocks. With the Ibovespa going through significant corrections in the last quarter and interest rates in a stabilization process, many solid companies are being traded with considerable discounts in relation to their intrinsic value.
A recent study by the University of São Paulo pointed out that approximately 23% of companies listed on B3 are being traded at a discount of more than 30% compared to their historical valuation averages – a significantly higher number than the 12% recorded in 2023.
However, identifying truly cheaper stocks requires methodology and careful analysis. In this moment of economic transition in Brazil, Pocket Option has developed an exclusive framework that combines traditional fundamental analysis with localized market intelligence, helping investors distinguish between legitimate opportunities and value traps.
Fundamental indicators to identify good and cheap stocks in the Brazilian context
Traditional indicators take on specific nuances when applied to the Brazilian market. For example, while a P/E of 15 may be considered reasonable in developed markets, in Brazil, with its higher risk premium, companies with P/E below 10 often catch the attention of value investors.
| Indicator | Brazilian parameter | Company example (2025) |
|---|---|---|
| P/E (Price/Earnings) | < 8 (excellent); 8-12 (good) | Petrobras (PETR4): P/E 6.2 |
| P/B (Price/Book Value) | < 1.0 (undervalued) | Banco do Brasil (BBAS3): P/B 0.8 |
| Dividend Yield | > 7% (attractive in the current scenario) | Taesa (TAEE11): Yield 9.8% |
| ROE (Return on Equity) | > 15% (superior efficiency) | WEG (WEGE3): ROE 19.7% |
| Net Debt/EBITDA | < 2.0 (conservative for Brazil) | Engie Brasil (EGIE3): 1.4x |
Pocket Option’s analysis indicates that Brazilian companies with attractive indicators often suffer excessive discounts for three main reasons: (1) misconceived perception of political risk, (2) low analyst coverage, and (3) inferior liquidity to blue chips. These inefficiencies create opportunities for informed investors.
P/E in the Brazilian context: a more sensitive thermometer
In Brazil, the historical average P/E of Ibovespa over the last 10 years was 13.2, significantly lower than the 18.4 of the S&P 500 in the same period. This difference reflects the higher risk premium in the Brazilian market, but also creates opportunities when quality companies fall below this level.
When analyzing P/E in Brazil, specifically consider:
Tested practical strategies for buying cheap stocks in the 2025 Brazilian market
The volatility of the Brazilian market in 2024-2025, driven by the combination of global and local factors, has created windows of opportunity for investors who know where and how to look for value. ANBIMA data shows that value funds outperformed the Ibovespa by 8.7% in the last 12 months, evidencing the effectiveness of this approach in the current scenario.
Value Investing adapted to Brazilian reality
Five successful Brazilian managers shared their adaptations of classic Value Investing for the local market, resulting in these practical guidelines:
| Adapted strategy | Practical application in Brazil | Recent success case |
|---|---|---|
| Expanded safety margin | Seek discounts of 40-50% instead of the traditional 20-30% | Vale (VALE3) after 2023-2024 correction |
| Emphasis on cyclical resilience | Prioritize companies that maintained margins in different economic scenarios | Ambev (ABEV3) during recent inflationary pressure |
| Capital allocation analysis | Evaluate how management allocates capital in volatile interest rate environment | Itaú (ITUB4) with its adaptive dividend policy |
| Governance discount | Quantify and adjust the discount applied for governance issues | Lojas Renner (LREN3) versus competitors with family control |
The Pocket Option platform has developed an exclusive dashboard for the Brazilian market that automates part of this screening process, allowing investors to apply these adapted strategies without the need to build complex models from scratch.
Cheapest stocks in the market: Brazilian sectoral analysis for 2025-2026
The Brazilian macroeconomic scenario of 2025, with inflation controlled at 4.1% and expectation of gradual reduction of the Selic rate, creates a favorable environment for specific sectors that have not yet fully priced in this improvement in conditions.
| Sector | Investment thesis | Cheapest stocks to buy |
|---|---|---|
| Utilities (Energy and Sanitation) | Predictable cash flows with yields above the new expected Selic | SBSP3 (P/E: 7.8), CMIG4 (Yield: 8.9%), SAPR11 (P/B: 0.9) |
| Civil Construction | Recovery cycle with renewed housing program and falling interest rates | MRVE3 (P/B: 0.65), CYRE3 (P/E: 8.1), EVEN3 (P/B: 0.5) |
| Technology | Excessive correction in 2024 with attractive valuations for expected growth | LWSA3 (Future P/E: 11), TOTS3 (EV/EBITDA: 7.2), CASH3 (P/E: 13.5) |
| Retail | Excessive discounts for players with well-executed omnichannel strategy | MGLU3 (P/Sales: 0.4), AMER3 (P/B: 1.2), VVAR3 (EV/EBITDA: 5.5) |
| Medium-sized banks | Attractive spreads and discounted multiples compared to large banks | SANB11 (P/E: 6.5), BPAC11 (P/B: 1.1), BIDI11 (Future P/E: 9.2) |
Pocket Option analysts highlight that the civil construction sector presents a particularly interesting combination of cheaper stocks in 2025, with multiples still depressed due to the previous cycle of interest rate hikes, but with fundamentals already recovering and growth projections for 2026 not yet reflected in current prices.
Avoiding traps when looking to buy cheap stocks in Brazil
The Brazilian market has characteristics that can transform apparent bargains into dangerous traps for investors. A survey by Economatica consultancy identified that 35% of stocks with P/E below 5 in 2022 presented additional deterioration of results in the following two years, reinforcing the need for analysis beyond multiples.
- The “Low P/E Fallacy”: Case of Cogna (COGN3) which seemed cheap with P/E of 6, but faced structural challenges in the educational sector that compromised its recovery
- The “Accountant Effect”: Companies like IRB Brasil (IRBR3) that used accounting practices that masked underlying problems in the business model
- The “Illusion of Unsustainable Dividend”: Case of Oi (OIBR3) that distributed dividends while its operational structure deteriorated
- The “Perpetual Bargain”: Companies in the steel sector that remain with low multiples for years due to structural issues of global competitiveness
- The “Governance Trap”: Companies with conflicts between controlling and minority shareholders, generating permanent discounts
Pocket Option has developed an alert system that identifies early signs of these common traps in the Brazilian market, including indicators of profit quality, dividend sustainability, and corporate governance, helping investors distinguish between truly good and cheap stocks and apparent problematic bargains.
Navigating different economic scenarios: how to adjust your search for cheaper stocks
Brazil has a history of pronounced economic cycles that significantly affect the definition of what constitutes a “cheap” stock. Understanding how to adapt your strategy to different scenarios is crucial for long-term success.
| Scenario | Characteristics of the best opportunities | Priority sectors (with examples) |
|---|---|---|
| Rising interest rates (as seen in 2023) | Low indebtedness, strong cash generation, ability to pass on inflation | Insurance (BBSE3), Exporters (SUZB3), Utilities (EGIE3) |
| Falling interest rates (current 2025 scenario) | High equity value, viable expansion projects, operational leverage | Construction (EZTC3), Retail (LAME4), Small caps (MILS3) |
| Accelerated inflation | Proven pricing power, market leadership, indexed contracts | Food (JBSS3), Energy (EQTL3), Infrastructure (CCRO3) |
| Recession | Robust balance sheet, inelastic demand, low beta | Health (FLRY3), Sanitation (SBSP3), Telecommunications (VIVT3) |
| Economic recovery | Operational leverage, idle capacity, rapid market share gain | Capital goods (WEGE3), Discretionary consumption (LREN3), Banks (BBDC4) |
The Pocket Option analysis team regularly produces contextualized reports that adjust the screening criteria for cheaper stocks based on the current economic cycle, allowing investors to adapt their strategies to the market moment.
Strategic timing for cheap stocks to buy
The Brazilian market presents recurring patterns that can be exploited to optimize entries in cheap stocks. Analysis of the historical series of the Ibovespa shows that:
- Cyclical sectors tend to reach minimum multiples approximately 2-3 months before interest rate cuts materialize
- Corrections above 15% in the Ibovespa historically create 4-6 week windows with opportunities in quality stocks at attractive valuations
- The Brazilian pre-election period often pushes multiples to levels unjustified by fundamentals
- Medium-sized companies with low analyst coverage tend to have their positive results priced with a delay of 2-3 quarters
- Foreign divestments due to global factors (not specific to Brazil) create tactical opportunities in blue chips
The Pocket Option platform offers an alert system that identifies these patterns in real time, notifying investors about windows of opportunity to accumulate good and cheap stocks at the most propitious moments of the market cycle.
The psychology behind the cheapest stocks in the Brazilian market
The Brazilian market, with its characteristic volatility and high sensitivity to political factors, regularly creates psychological distortions that translate into opportunities for disciplined investors. Research conducted by FGV in 2024 showed that Brazilian stocks tend to be priced with a “pessimism discount” 22% greater than justified by fundamentals in moments of political uncertainty.
| Brazilian behavioral bias | Market impact | Opportunity created |
|---|---|---|
| Political hypersensitivity | Exaggerated corrections in electoral periods or political tension | Companies with low regulatory exposure sold indiscriminately |
| Preference for liquidity | Excessive discount in medium-sized companies with solid fundamentals | Mid caps with consistent cash flow at depreciated multiples |
| Extreme aversion to cyclical sectors | Abandonment of entire sectors at cycle lows | Sector leaders with robust balance sheets sold as weak companies |
| Inflationary memory | Disproportionate panic with any inflationary sign | Companies with pricing power and low indebtedness unfairly penalized |
Pocket Option analysts have developed quantitative models that try to capture these moments of “excessive pessimism” in the Brazilian market, identifying disparities between the market reaction and the real impact of events on companies, thus creating a radar of good and cheap stocks generated by temporary behavioral distortions.
Practical tools for identifying cheaper stocks with Pocket Option
Pocket Option provides specific tools for the Brazilian market that facilitate the methodical identification of undervalued stocks, even for investors without access to institutional resources:
Exclusive multidimensional comparative analysis
Pocket Option’s differential lies in its ability to perform comparative analyses that go beyond traditional indicators, incorporating specific factors of the Brazilian market:
- Automatic comparison of multiples adjusted to the Brazilian economic cycle
- Correlation analysis between price and fundamentals in the last 5 market cycles
- Quantitative assessment of corporate governance and its impact on valuation
- Stress scenario modeling specific to the Brazilian reality
- Tracking movements of local and foreign institutional investors
Pocket Option’s proprietary algorithm recalculates these models daily for more than 200 Brazilian stocks, generating alerts when significant discrepancies between value and price arise.
| Exclusive tool | Functionality | Investor benefit |
|---|---|---|
| Brazil Value Scanner | Multifactorial filtering of stocks by value criteria adapted to Brazil | Quick identification of stocks with significant discounts versus sector peers |
| Safety Margin Calculator | Intrinsic value estimation with adaptable discount factors | Precise determination of target entry price to maximize safety margin |
| Cyclical Opportunities Alert | Monitoring of cyclical companies at sector cycle lows | Improved timing for entries in Brazilian cyclical sectors |
| Historical Multiple Comparator | Analysis of the evolution of multiples in different economic cycles | Clear visualization of when a stock is trading below its historical averages |
Conclusion: Taking advantage of the current moment to invest in cheaper stocks in Brazil
The Brazilian market of 2025 presents a particularly favorable scenario for investors seeking cheaper stocks with potential for appreciation. The combination of interest rates on a downward trajectory, controlled inflation, and still depressed multiples in specific sectors creates a window of opportunity not seen since 2016-2017.
Our analysis identified three main characteristics of the best current opportunities:
- Resilient companies with depreciated multiples: Companies that maintained solid results during the cycle of high interest rates, but have not yet seen their multiples recover completely;
- Sectors at the beginning of cyclical recovery: Especially civil construction, non-food retail, and medium-sized banks, which historically lead recoveries after cycles of monetary tightening;
- Companies with specific catalysts for 2025-2026: Including operational restructuring, strategic expansions, or sector consolidations already announced but not yet completely priced in.
Pocket Option has consolidated these opportunities in an exclusive report “Cheap Stocks Brazil 2025”, available to all platform clients, with detailed analyses of 25 companies that represent the best value opportunities in the current market, categorized by risk profile and recommended investment horizon.
We remind you that, despite existing opportunities, investing in cheaper stocks requires discipline, informed analysis, and patience. The differential of the successful investor lies precisely in the ability to identify value where others see only numbers, transforming knowledge into consistent and profitable investment decisions in the long term.
FAQ
What characterizes a stock as "cheap" in the Brazilian market?
A stock is considered cheap when it's trading below its intrinsic value, not just by its low nominal price. In the Brazilian market, this is usually reflected in multiples such as P/E below the sector average, reduced P/B, or high dividend yield. However, it's important to contextualize these indicators considering the sector, the macroeconomic moment, and the company's history.
What is the difference between a cheap stock and a "value trap"?
A genuinely cheap stock is temporarily undervalued but has solid fundamentals and recovery potential. A "value trap," on the other hand, looks cheap by multiples but hides structural problems such as business deterioration, excessive debt, or governance issues that justify the discount. The distinction requires deep analysis of the company's fundamentals and competitive context.
How does the Selic rate influence the valuation of cheaper stocks?
The Selic rate has a direct impact on multiples considered attractive in the Brazilian market. In high interest rate scenarios, multiples tend to be more compressed as fixed income becomes more competitive. Thus, a P/E of 8 might be considered normal during periods with a 12% Selic rate, while the same multiple would represent an exceptional bargain in a 5% interest rate environment.
How important is liquidity when investing in cheap stocks in Brazil?
Liquidity is a crucial factor, especially in the Brazilian market where many small and mid-caps present attractive multiples but low trading volume. Stocks with low liquidity offer additional risks such as high spread between buy and sell orders, difficulty exiting during crisis moments, and greater volatility. Retail investors should balance the search for bargains with adequate liquidity levels.
How does Pocket Option help in identifying cheaper stocks?
Pocket Option offers specific tools that combine fundamental, technical, and behavioral analysis to identify opportunities in cheaper stocks. The platform provides customizable screeners, sector comparative analyses, alerts for significant divergences in multiples, and educational resources on value strategies. These resources allow a more systematic and disciplined approach in the search for undervalued stocks in the Brazilian market.