{"id":5681,"date":"2020-03-01T15:50:41","date_gmt":"2020-03-01T18:50:41","guid":{"rendered":"https:\/\/artica.capital\/asset-cartas\/case-de-investimento-long-short-em-bradespar-vale\/"},"modified":"2025-08-19T10:54:46","modified_gmt":"2025-08-19T13:54:46","slug":"case-de-investimento-long-short-em-bradespar-vale","status":"publish","type":"cartas","link":"https:\/\/artica.capital\/en\/asset-cartas\/case-de-investimento-long-short-em-bradespar-vale\/","title":{"rendered":"Investment Case: Long-short in Bradespar-Vale"},"content":{"rendered":"<div class=\"wp-block-group has-global-padding is-layout-constrained wp-container-core-group-is-layout-eb5bab19 wp-block-group-is-layout-constrained\">\n<div class=\"wp-block-columns artica-content-spaces artica-card-container is-layout-flex wp-container-core-columns-is-layout-28f84493 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column artica-side-content is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:365px\">\n<div class=\"wp-block-group artica-carta-toc has-pureza-background-color has-background has-global-padding is-layout-constrained wp-container-core-group-is-layout-09e94731 wp-block-group-is-layout-constrained\" style=\"margin-bottom:0;padding-top:24px;padding-right:24px;padding-bottom:24px;padding-left:24px\">\n<div class=\"wp-block-group has-global-padding is-layout-constrained wp-block-group-is-layout-constrained\">\n<div class=\"wp-block-group has-global-padding is-layout-constrained wp-block-group-is-layout-constrained\">\n<nav class=\"wp-block-pycblocks-table-of-contents-pyc artica-toc artica-carta-toc has-rocha-color has-text-color has-link-color wp-elements-bef09a9fec341585db7af206baed90c5\"><ol><li><span class=\"wp-block-table-of-contents__entry\">Investment Case: Long-short in Bradespar-Vale<\/span><\/li><\/ol><\/nav>\n<\/div>\n<\/div>\n\n\n\n\n<div style=\"font-size:12px; padding-right:40px;padding-left:40px;\" class=\"wp-block-pycblocks-read-time-pyc\">\n      5&nbsp; min de leitura<\/div>\n<\/div>\n<\/div>\n\n\n\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:70px\"><\/div>\n\n\n\n<div class=\"wp-block-column artica-carta-text is-layout-flow wp-block-column-is-layout-flow\">\n<h2 class=\"wp-block-heading has-noite-color has-text-color has-link-color wp-elements-52fcecdc927489f6a14505750e9dd55b\">Investment Case: <em>Long-short<\/em> in Bradespar-Vale<\/h2>\n\n\n\n<p>Dear investors,<\/p>\n\n\n\n<p>In this memo, we share with you an unorthodox arbitrage investment we carried out between 2018 and 2019 that yielded excellent results. It&#039;s a good example of leveraging risk-return asymmetry to the investor&#039;s advantage.<\/p>\n\n\n\n<p>The transaction consisted of the purchase of Bradespar shares accompanied by the sale of Vale shares.<\/p>\n\n\n\n<p>Bradespar is a <em>holding<\/em> publicly traded company founded by the controlling block of the Bradesco Group with the objective of investing in assets traded on the stock exchange and diversifying the Group&#039;s capital.<\/p>\n\n\n\n<p>After selling its entire stake in CPFL Energia in December 2017, Bradespar&#039;s sole investment in its portfolio was Vale, a company in which it has been a partner since its privatization. Thus, Bradespar effectively became a vehicle for indirect investment in Vale.<\/p>\n\n\n\n<p>Como \u00e9 comum em casos similares (observados em Gerdau \u2013 Metal\u00fargica Gerdau, Ita\u00fa Unibanco \u2013 Ita\u00fasa, Iguatemi \u2013 Jereissati Participa\u00e7\u00f5es, dentre outros), a Bradespar \u00e9 cotada com um desconto de seu NAV<sup>1<\/sup> \u2013 that is, it is worth less on the stock exchange than the market value of its stake in Vale. This discount is called a <em>holding<\/em> and exists due to the fact that the intermediate vehicle \u2013 the <em>holding<\/em> \u2013 add an additional layer of uncertainty to the asset, since it can apply the resources from its investment (dividends, interest on equity and sales of shares on the market) at its discretion, and may even allocate them to low-profit activities, destroying value for its shareholders.<\/p>\n\n\n\n<p>In general, the discount of <em>holding<\/em> observed in similar cases fluctuates around 20% of NAV, which, historically, can be observed at Bradespar<sup>2<\/sup><\/p>\n\n\n\n<p>In 2018, there was a movement to increase the discount of <em>holding<\/em> due to a legal dispute brought by El\u00e9tron, a company of the Opportunity Group (owned by businessman Daniel Dantas). The dispute had been going on for 11 years and involved a lawsuit filed by El\u00e9tron against Bradespar and Litel. In May 2018, the court approved an expert report that stipulated compensation for El\u00e9tron in the amount of R$4.4 billion, of which Bradespar would be responsible for half.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"2217\" height=\"1055\" src=\"\/wp-content\/uploads\/2025\/08\/case-de-investimento-long-short-em-bradespar-vale-01.webp\" alt=\"-\" class=\"wp-image-5679\" srcset=\"https:\/\/artica.capital\/wp-content\/uploads\/2025\/08\/case-de-investimento-long-short-em-bradespar-vale-01.webp 2217w, https:\/\/artica.capital\/wp-content\/uploads\/2025\/08\/case-de-investimento-long-short-em-bradespar-vale-01-300x143.webp 300w, https:\/\/artica.capital\/wp-content\/uploads\/2025\/08\/case-de-investimento-long-short-em-bradespar-vale-01-1024x487.webp 1024w, https:\/\/artica.capital\/wp-content\/uploads\/2025\/08\/case-de-investimento-long-short-em-bradespar-vale-01-768x365.webp 768w, https:\/\/artica.capital\/wp-content\/uploads\/2025\/08\/case-de-investimento-long-short-em-bradespar-vale-01-1536x731.webp 1536w, https:\/\/artica.capital\/wp-content\/uploads\/2025\/08\/case-de-investimento-long-short-em-bradespar-vale-01-2048x975.webp 2048w, https:\/\/artica.capital\/wp-content\/uploads\/2025\/08\/case-de-investimento-long-short-em-bradespar-vale-01-18x9.webp 18w\" sizes=\"auto, (max-width: 2217px) 100vw, 2217px\" \/><\/figure>\n\n\n\n<p>The news caused Bradespar&#039;s holding discount to increase considerably (the discount reached 40%, as shown in the chart above). In our view, the increase was exaggerated: even assuming a scenario in which Bradespar covered 100% of the contingency, or R$ 4.4 billion, the adjusted discount would still be 23.5%, above the historical average of 20%. In our view, this would be the worst-case scenario.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"556\" height=\"216\" src=\"\/wp-content\/uploads\/2025\/08\/case-de-investimento-long-short-em-bradespar-vale-02.webp\" alt=\"-\" class=\"wp-image-5680\" srcset=\"https:\/\/artica.capital\/wp-content\/uploads\/2025\/08\/case-de-investimento-long-short-em-bradespar-vale-02.webp 556w, https:\/\/artica.capital\/wp-content\/uploads\/2025\/08\/case-de-investimento-long-short-em-bradespar-vale-02-300x117.webp 300w, https:\/\/artica.capital\/wp-content\/uploads\/2025\/08\/case-de-investimento-long-short-em-bradespar-vale-02-18x7.webp 18w\" sizes=\"auto, (max-width: 556px) 100vw, 556px\" \/><\/figure>\n\n\n\n<p>To capture this opportunity, our investment should be positioned based on the discount of <em>holding<\/em> Bradespar, capturing the value in the return of the discount to historical levels. The way we found to structure this operation was through a <em>long short<\/em><sup>3<\/sup>: we stayed <em>long<\/em> in Bradespar (BRAP4) and <em>short<\/em> in Vale (VALE3), so that losses generated by the appreciation of VALE3 were offset by gains from the appreciation of BRAP4 and that only the relative fluctuation between the price of BRAP4 and VALE3 affected our investment \u2013 an important point, since we did not want to bet on the absolute direction of the movement of these shares (which avoided, for example, a loss of capital for Arc\u00e1dia after the Brumadinho accident, when Vale shares fell more than 24% in just one day).<\/p>\n\n\n\n<p>The fact that it is a <em>long short<\/em> This gave the investment an interesting characteristic, as it didn&#039;t require large amounts of resources, as we used the proceeds from the sale of VALE3 to purchase BRAP4. In other words, it wasn&#039;t necessary to withdraw funds from other assets, or even from cash, to invest in the thesis.<\/p>\n\n\n\n<p>We set up the operation between June and September 2018, when the discount of <em>holding<\/em> fluctuated around 39% until we reached the maximum limit allowed by the Arc\u00e1dia regulations.<\/p>\n\n\n\n<p>Since then, Bradespar, Litel and El\u00e9tron approved an agreement in which they agreed to total compensation of R$ 2.8 billion, well below the initial R$ 4.4 billion, divided equally between Bradespar and Litel (R$ 1.4 billion for each).<\/p>\n\n\n\n<p>Litel attempted to legally charge Bradespar for the reimbursement of the R$1.4 billion it had paid, but recently, in December 2019, a court decision was released stating that the claim had been denied.<\/p>\n\n\n\n<p>This news positively impacted the discount, which fell from 39% to the current level of 13% (as of February 2020). The reduction in the discount generated a great result for Arc\u00e1dia \u2013 a total return of 91.2%.<sup>4<\/sup> on the capital employed, which represents an annualized return of 47.7% until February 2020.<\/p>\n\n\n\n<p>The question that remains is this: what would happen if the discount of <em>holding<\/em> increase instead of decrease? Although &quot;on paper&quot; the operation could have presented a negative result, in practice it was only a matter of time for the discount to narrow, as the market tends to correct significant value movements over time. And we had enough time to wait because, since we bought Bradespar &quot;cheaply,&quot; the dividends received from the position <em>long<\/em> were greater than the cost of maintaining the position <em>short<\/em> \u2013 in other words, we were effectively being paid to wait and make money!<\/p>\n\n\n\n<p>The case described above illustrates an alternative way to obtain a differentiated return combined with a significantly reduced risk exposure. This type of investment serves as an important complement to a portfolio and becomes even more attractive in times of <em>bull market<\/em>, when it becomes increasingly difficult to find good stocks at reasonable prices on the stock exchange.<\/p>\n\n\n\n<p>To make investments like this, you need to be aware of the opportunities the market offers and exercise the same common sense and analytical skills that are naturally required for more traditional stock investments.<\/p>\n\n\n\n<p><sup>1<\/sup>NAV: <em>Net Asset Value<\/em>. Indicates the market value of assets discounted from the market value of liabilities.<\/p>\n\n\n\n<p><sup>2<\/sup>The peak of the discount <em>holding<\/em> observed in the graph (between 2013 and 2016) occurred when the end of Vale&#039;s Shareholders&#039; Agreement was approaching, which was due to expire in 2017. However, the Agreement was renewed and returned to levels close to 20% in 2017<\/p>\n\n\n\n<p><sup>3<\/sup><em>Long<\/em>: Invest in a share (profits occur when the share increases in value);&nbsp;<em>Short<\/em>: Betting against the stock (profits occur when the stock depreciates). Strategies&nbsp;<em>long short<\/em>&nbsp;are used for investments in which the thesis is the relative variation in the value of assets, not their absolute variation.<\/p>\n\n\n\n<p><sup>4<\/sup>Until 02\/28\/2020<\/p>\n<\/div>\n<\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Na carta deste m\u00eas, compartilhamos um case de investimento long-short entre Bradespar e Vale, explorando o desconto de holding da Bradespar causado por uma disputa judicial. A estrat\u00e9gia comprou Bradespar e vendeu Vale, capturando a valoriza\u00e7\u00e3o do desconto sem exposi\u00e7\u00e3o \u00e0 dire\u00e7\u00e3o absoluta das a\u00e7\u00f5es. Com o acordo judicial e a redu\u00e7\u00e3o do desconto, o investimento gerou retorno anualizado de 47,7%, ilustrando como arbitragem assim\u00e9trica pode agregar valor e reduzir riscos no portf\u00f3lio.<\/p>","protected":false},"author":1,"featured_media":5678,"template":"","meta":[],"class_list":["post-5681","cartas","type-cartas","status-publish","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/artica.capital\/en\/wp-json\/wp\/v2\/cartas\/5681","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/artica.capital\/en\/wp-json\/wp\/v2\/cartas"}],"about":[{"href":"https:\/\/artica.capital\/en\/wp-json\/wp\/v2\/types\/cartas"}],"author":[{"embeddable":true,"href":"https:\/\/artica.capital\/en\/wp-json\/wp\/v2\/users\/1"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/artica.capital\/en\/wp-json\/wp\/v2\/media\/5678"}],"wp:attachment":[{"href":"https:\/\/artica.capital\/en\/wp-json\/wp\/v2\/media?parent=5681"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}