Here's Goldman Sachs' playbook for trading in Latin America's biggest market

Published Wed, May 4 20222:17 PM EDTUpdated Wed, May 4 20226:59 PM EDT

Brazilian stocks are some of the best performers in 2022 after years of underperformance, and there are some names that stand to outperform going forward, according to Goldman Sachs. The iShares MSCI Brazil ETF is up more than 17% year to date, while Bovespa , the country's stock market benchmark, is also up 3.3% so far this year. Those gains are worth highlighting; in comparison, the S & P 500 is off more than 9% year to date. Brazil's strong showing this year comes as investors bet that Latin America could fill a global commodities void left by Russia due to its war in Ukraine . Stock valuations in the region are also at record lows. Given the potential for an economic boom in Latin America, and Brazil being its biggest market, Goldman Sachs underscored several names in the country that could do well going forward. The firm said it compiled its list by bringing together "micro-level data points from across the sectors and a macro perspective on inflation." Take a look at five of the buy-rated names that made Goldman's list: JBS Food-processing company JBS made Goldman's list given the company's exposure to the U.S. "86% of the consolidated EBITDA is derived from the U.S. market (beef, chicken and pork), a region where demand has been resilient and the animal cycle remains broadly controlled," Goldman said, adding there is "limited space" for further price hikes in Brazil given the inflationary pressures seen there. JBS' U.S.-listed shares are up 8% year to date. Vtex Goldman Sachs called e-commerce platform Vtex its "main Brazil [technology, media, and telecom] pick for an inflationary scenario," citing strong revenue growth guidance for the year and margin improvements. The firm also noted that "VTEX combines switching costs and a leading product with attractive valuation and a major global-expansion optionality." Vtex shares have struggled in 2022, falling more than 47%. Arco Platform Educational services provider Arco Platform "combines a defensive profile, improving results and an attractive valuation," according to Goldman, which called the company its main Brazil education pick for an inflationary environment. The company's U.S.-listed shares are down roughly 8.3% for the year. Petrobras Petrobras made Goldman's list in part because of its exposure to higher oil prices, as well as an estimated dividend yield of 35% for 2022. "PBR has been tracking international fuel prices thus benefiting from higher oil prices and crack spreads. Coupled with a lighter balance sheet … and capex still near cycle lows (harvest mode) this should translate into strong FCF and dividends," Goldman said. U.S-traded shares of Petrobras have been on fire this year, rallying about 28%. Banco do Brasil Goldman analysts highlighted Banco do Brasil in part because of its low valuation relative to other companies in the space. "Banco do Brasil trades at a significant discount to peers, given its government ownership. However, we think such discount is excessive, as it is trading at a 49% discount on a P/E basis, compared to an historical average of ~25%, and a 57% P/BV discount vs. an historical average of ~35%," Goldman said. U.S.-listed shares of Banco do Brasil are up more than 36% in 2022. — CNBC's Michael Bloom contributed to this report.

Sao Paulo's Stock Exchange (Bovespa) headquarters.

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Brazilian stocks are some of the best performers in 2022 after years of underperformance, and there are some names that stand to outperform going forward, according to Goldman Sachs.