Ambev (NYSE:ABEV) is one of the most undervalued penny stocks to buy right now. On February 12, Ambev reported its Q4 2025 financial results, where the company achieved a stated net income of nearly 16 billion BRL, with EPS increasing by 8.2% year-over-year. The company’s digital ecosystem saw robust performance, with the B2B marketplace GMV growing 70% and consumer delivery GMV rising 13% to 4.7 billion BRL. Quarterly revenue totaled $4.76 billion, which modestly rose by 2.31% year-over-year. Despite fi ...

Group 1: Political Landscape in Lebanon - Saad Hariri emphasizes the importance of national sovereignty and positions his Future Movement as a "safety valve" for Lebanon during a significant anniversary speech [2] - Hariri's return to political activity follows a suspension in 2022, citing state dysfunction and external influences, and he expresses optimism for Lebanon's future [2] - High-level diplomatic meetings with U.S. and French ambassadors indicate Hariri's continued relevance as a moderate voice in Lebanon's Sunni political landscape [3] Group 2: Brazilian Tourism and Economic Impact - São Paulo has been recognized as the world's best city for nightlife in the 2026 World's Best Cities report, enhancing its appeal as a tourist destination [4][8] - The upcoming Carnival 2026 season is projected to see a 22.6% increase in foreign arrivals compared to the previous year, providing a boost to Brazil's tourism sector [5][8] - The tourism sector contributed $7.865 billion to the Brazilian economy over the past year, marking a 7.1% year-over-year increase, benefiting major companies like Ambev and Azul S.A. [6][8]

Company Overview - Ambev S.A. (NYSE:ABEV) is a major Brazilian-based brewery and beverage company, producing and distributing a diverse portfolio of beer, carbonated soft drinks, and other non-alcoholic beverages across the Americas. It operates in 18 countries and is a subsidiary of Anheuser-Busch InBev, with strong market leadership in Brazil [4]. Financial Performance - For the fourth quarter, Ambev reported revenues of R$24.81 billion, exceeding consensus estimates by R$210 million, despite an 8.2% year-over-year decline attributed to a 3.6% decrease in consolidated volumes due to cyclical consumption factors [1][2]. - The company's fourth-quarter profit fell by 9.9% year-over-year to R$4.53 billion, resulting in earnings per share of R$0.28, down from R$0.31 in the same period last year [2]. - Cash flow from operating activities decreased by 4.8% to R$13.91 billion, while full-year cash flow dropped 6.3% to R$24.45 billion [3]. Shareholder Commitment - Ambev has affirmed its commitment to shareholder value by announcing a R$20 billion return through share buybacks and dividends [3]. Future Outlook - Management remains optimistic about the beer category, citing the strength of their portfolio and successful innovations as key factors for potential growth opportunities by expanding the consumer base and increasing consumption occasions [4].

Core Insights - The article highlights the investment strategies of Paul Franke, a seasoned investor with 39 years of trading experience, emphasizing his contrarian stock selection style and the development of a system called "Victory Formation" for identifying stocks based on supply/demand imbalances [1] Group 1: Investment Strategies - Paul Franke suggests using a diversified approach by owning at least 50 well-positioned stocks to achieve regular stock market outperformance [1] - The "Bottom Fishing Club" articles focus on deep value candidates or stocks that are experiencing a significant reversal in technical momentum [1] - The "Volume Breakout Report" articles discuss positive trend changes supported by strong price and volume trading action [1] Group 2: Performance and Recognition - Franke was consistently ranked among the top investment advisors nationally during the 1990s and was ranked 1 in the Motley Fool® CAPS stock picking contest during parts of 2008 and 2009, out of over 60,000 portfolios [1] - As of December 2025, he was ranked in the Top 4% of bloggers by TipRanks® for 12-month stock picking performance based on suggestions made over the last five years [1] Group 3: Risk Management - Franke recommends investors implement stop-loss levels of 10% or 20% on individual stock choices to manage risk effectively [1]

Core Viewpoint - The political instability in Brazil, characterized by a cycle of leaders facing legal issues, directly impacts the capital market, leading to significant volatility and uncertainty for investors [2][3]. Group 1: Market Reactions and ETF Dynamics - On December 5, the Brazilian stock market experienced a sharp decline of 4.3%, with ETFs following suit, triggered by political developments [3]. - Despite the risks, Brazilian ETFs saw a massive influx of investment, with subscription funds reaching seven times the target, indicating a strong interest from mature investors [4][10]. - The initial performance of Brazilian ETFs was marked by a high opening followed by a significant drop, raising questions about investor motivations and the potential for future volatility [5][6]. Group 2: Historical Context and Performance - The IBOVESPA index, which the Brazilian ETFs track, has shown a remarkable increase of 25.08% this year, recently surpassing 150,000 points for the first time [23]. - Historically, the IBOVESPA index has increased by 1,533 times over 60 years, but much of this growth is attributed to monetary expansion rather than sustainable economic performance [24][26]. - The index's annualized return over the past decade is approximately 9%, but real returns are significantly lower when accounting for currency depreciation [26]. Group 3: Economic Factors and Future Outlook - Brazil's economic environment is characterized by high interest rates, stable currency, and declining fiscal deficits, making it attractive for foreign investment [30][31]. - The current price-to-earnings ratio of the IBOVESPA index is 8.73, indicating potential for valuation increases as earnings grow [32]. - The Brazilian economy's reliance on resource exports and its structural issues pose risks, particularly in a high-interest environment that discourages retail investor participation [34][35]. Group 4: Investment Considerations - The appeal of Brazilian ETFs lies in their scarcity and the regulatory environment, which allows for T+0 trading, attracting short-term traders [12][13]. - Investors are advised to be cautious, as the dynamics of foreign ETFs can lead to significant price fluctuations driven by market sentiment rather than fundamentals [19][21]. - The long-term viability of Brazilian ETFs will depend on the performance of the underlying IBOVESPA index and the broader economic conditions in Brazil [21][37].

Group 1 - Ambev is considered a cheap penny stock, with Barclays maintaining a Hold rating and a price target of $2.5, while Bernstein downgraded it to Market Perform with a price target of $2.88 due to valuation concerns after a 16% year-to-date gain [1][2] - In Q3 2025, Ambev's premiumization strategy led to over 9% growth in volumes for premium and super-premium brands, capturing nearly 50% market share in Brazil [2] - The company's digital ecosystem showed significant growth, with the marketplace initiative's GMV increasing 100% to an annualized BRL 8 billion, and the DTC platform Ze Delivery seeing a 7% GMV increase [2] Group 2 - Despite positive developments, Ambev faced challenges such as softer beer industry volumes in Brazil due to unseasonably cold weather and constrained consumer purchasing power, along with a mid-single-digit decline in Argentina's beer volumes [3] - Financially, Ambev reported a normalized net income of BRL 3.8 billion (up 7%) and a stated net income of BRL 4.9 billion, representing a 36% increase year-over-year [3] - Ambev operates in the production, distribution, and sale of various beverages across Brazil, Central America, the Caribbean, and parts of Latin America and Canada [4]

Market Trends - Capital is shifting from high-multiple mega-cap stocks to small caps, cyclical sectors, and international markets, driven by easy monetary policy and anticipated fiscal policy impacts on the US economy [1] - The S&P SmallCap 600 is highlighted as a preferred investment vehicle for small caps due to its concentration in industrials and financials [1] - Small caps are considered undervalued and historically outperform during rate-cutting cycles [1] Small Cap Performance - The Russell 2000 index reached new all-time highs in September, while the S&P 600 struggled initially, indicating a prior reliance on lower-quality stocks [2] - Recently, the S&P 600 has joined the upward trend of the Russell 2000, nearing its own all-time highs [2] - Small caps are currently at levels similar to those four years ago, suggesting potential for significant upside if the breakout holds [2] Company Insights: Ambev (NYSE:ABEV) - Ambev has a forward P/E ratio of 13.30 and a share price of $2.30, with 20 hedge fund holders [8] - The company reported a normalized net income of BRL 3.8 billion, a 7% increase, and a stated net income of BRL 4.9 billion, a 36% surge year-over-year [11] - Ambev's premiumization strategy led to over 9% growth in volumes for premium brands, capturing nearly 50% market share in Brazil [10] Company Insights: Akebia Therapeutics Inc. (NASDAQ:AKBA) - Akebia has a forward P/E ratio of 8.73 and a share price of $1.66, with 21 hedge fund holders [13] - The company is expanding its pipeline for rare kidney diseases, focusing on two product candidates: AKB-097 and praliciguat [13] - Akebia's Vafseo is an oral treatment for anemia in dialysis patients, approved in 37 countries, with a Boxed Warning for increased risks of serious health issues [14]

Group 1 - Ambev SA (NYSE:ABEV) experienced a significant drop in share prices, falling by 7.63% to close at $2.30 due to a lack of buying catalysts and early window-dressing activities [1] - The company is known for owning Brazil's leading beer brands, including Skol, Brahma, Antarctica, Bohemia, and Quilmes [2] - Bernstein downgraded Ambev's rating from "outperform" to "market perform," citing that current expectations for the company are "overblown," despite confidence in its long-term fundamentals [3] Group 2 - Bernstein recommended investors take profits on Ambev shares and wait for a more attractive entry point before re-entering the stock [3]

Group 1: Brazilian ETF Performance - Brazilian ETFs are rising against the market trend, tracking the IBOVESPA ETF index, which includes around 80 representative companies from Brazil's mining, agriculture, finance, and energy sectors [1] - The current price-to-earnings ratio of the IBOVESPA index is 10.51, positioned at the 43.46th percentile over the past decade, while the dividend yield stands at 7%, at the 73.31st percentile [1] Group 2: Cross-Border ETF Growth - The cross-border ETF market is experiencing rapid growth, with the total number of ETFs reaching 200 and a combined scale of 927.857 billion, indicating strong expansion momentum [2] - Global liquidity easing expectations have led to robust performance in risk assets, attracting more investors to participate in global markets through cross-border ETFs [2] Group 3: Investment Considerations for Cross-Border ETFs - Key factors for investing in cross-border ETFs include the tracking index, liquidity, and premium rate, which significantly influence long-term investment returns [3] - The largest cross-border ETF, the Hong Kong Internet ETF, has a concentrated holding structure, which increases its elasticity [3] - Liquidity is crucial, as insufficient liquidity can lead to price distortions and significant price impacts when large funds enter or exit [3]

Core Thesis - Ambev S.A. is perceived as undervalued, trading at approximately a 23% discount to its fair value, suggesting a potential annual alpha of 9% if the valuation gap closes within three years [2] Valuation Metrics - As of December 1st, Ambev's share price was $2.57, with trailing and forward P/E ratios of 13.45 and 13.26 respectively [1] - The stock is trading at 14–15× forward P/E compared to its historical average of 17–18×, indicating a potential re-rating towards $2.9/share as margins normalize [4] Financial Performance - Ambev has experienced approximately 12% growth in BRL in 2024 and a long-term CAGR of 10% locally, although its USD performance has faced translation losses with 2–4% declines in EPS and FCF over the past decade [2] - Easing input costs, pricing discipline, and premiumization through brands like Budweiser, Stella, and Corona are contributing to margin recovery [3] Market Conditions - Stabilizing volumes and operating leverage from Brazil's scale, along with strong performance in Latin America South, could enhance profitability [3] - Currency stability and falling interest rates, combined with Ambev's net cash position, support cash generation and a projected 5–6% dividend yield [3] Competitive Landscape - Risks include renewed cost inflation, FX headwinds from BRL depreciation, macroeconomic uncertainty in Brazil and Argentina, competitive pressures from Heineken and local brewers, and limited long-term volume growth in a mature beer market [4] Investor Sentiment - Despite strong fundamentals, there is caution regarding execution missteps or reduced dividends that could negatively impact sentiment [5] - Ambev is not among the 30 most popular stocks among hedge funds, with 23 hedge fund portfolios holding ABEV at the end of Q2, up from 21 in the previous quarter [7]