The Ibovespa ended the first half of 2022 with a drop of 5.94%, making it the worst investment in the period. But some stocks went further down the drain: Magazine Luiza (MGLU3), for example, was the most undervalued since January, losing more than half of its value.
Other retail and consumer stocks also fell. Tourism companies are still on the list of the worst performers of the Ibovespa, an index that gathers some of the shares traded on the Stock Exchange. See below the list of the biggest drops and the analysis about Magazine Luiza.
The biggest drops in the Ibovespa
Check out the ten worst performances among the stocks that make up the Ibovespa, from January to June 2022, according to Einar Rivero’s calculations supported by data from the TC/Economatica platform:
Magazine Luíza (MGLU3) – -67.59%Méliuz (CASH3) – -66.67%Via (VIIA3) – -63.43%Locaweb (LWSA3) – -57.29%Americanas (AMER3) – -56.40 %Embraer (EMBR3) – -53.91%IRB Reinsurance (IRBR3) – -49.50%Azul (BLUE4) – -49.18%Alpargatas (ALPA4) – – 48.07%CVC (CVCB3) – -47, 99%
Of the ten biggest declines in the period, at least six companies are linked to the consumer and retail sector (Méliuz, Via, Americanas, Alpargatas and Natura, in addition to Magazine Luíza). They suffer because the consumer is buying less, in an environment of rising prices and high interest rates. Azul and CVC, linked to the tourism segment, also suffer at a time of more expensive trips. But why does Magazine Luiza suffer more than other actions?
Of every 100 sales the company makes, 73 are in installments, according to data released by the retailer for the first quarter of 2022.
“Unlike Americanas, which sells a lot cheaper items and depends less on credit, Magalu is more exposed to durable goods, such as furniture, appliances. So it sells more installments than its competitors and this increases the risk of the action, especially when interest goes up”, says Lívia Rodrigues, analyst at Ativa Investimentos.
To face this lean period, the company has diversified its sales mix, focusing on cheaper items, such as cleaning products, personal care, drinks and food.
But even so, it is difficult for the company. The surprising thing is that even with such a drastic fall, the paper continues to be the darling of the stock market. Despite the drop of 66.34% in these six months, MGLU3 remains the most traded on the São Paulo Stock Exchange.
“This happens because of the share’s appreciation history”, says Lívia.
When it went public in 2011, MGLU3 was worth R$0.51. The paper dragged on in the cents until 2017, when it started to climb a high peak – which culminated, at the beginning of the pandemic, in an appreciation of 2662% (since entering the B3).
But it was not just that. After the scare with the closing of stores at the beginning of the quarantine, in 2020, the role of the retailer rose again. That year, interest rates dropped to 2% and e-commerce was booming. Conclusion: on the eve of Black Friday 2020, in the first days of November, the stock hit BRL 27.34. In relation to the opening BRL 0.51, the jump is 5260%. In other words: those who invested BRL 100 already in 2011, at the end of 2020 had BRL 5,360.
The pandemic came, the government increased expenses and broke the spending ceiling, inflation rose, interest rates went above 13% – all this in less than two years.
Today, that same investor who went from R$100 to more than R$5 thousand – now has R$458. It is still a 358% gain compared to 2011. But a discount of more than 90% in relation to the maximum value Reached.
And what to do with the shares?
“I don’t see any high triggers in the short term that make the shares appreciate”, says Lívia.
For stocks to recover, the economic environment needs to change, says Gustavo Pazos, an analyst at Warren. The loss of purchasing power of the population suffered until now with the rise in prices would need to be remedied.
The only thing that can cheer up the investor is that the discount on the share is very large. This could open some room for price correction. “But it all depends on the economic environment”, he reinforces.