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]

Core Viewpoint - Johnson & Johnson (J&J) has emerged as a standout performer in the healthcare sector, being the 10th best performing healthcare stock in the S&P 500, with a year-to-date increase of 21.5% despite the overall market downturn in healthcare [1][20]. Company Performance - J&J's success is attributed to its diversified business model, which includes a strong medical device division that accounts for 36% of sales, alongside its pharmaceutical operations [3][4]. - The medical technology division has shown steady growth, particularly in cardiovascular, orthopedic, surgery, and vision sectors, bolstered by significant acquisitions totaling nearly $30 billion [4]. - The pharmaceutical division, despite facing challenges such as the patent expiration of its key drug Stella, has managed to outperform sales expectations, with analysts projecting a 5% growth for the year [9][20]. Drug Portfolio - J&J's immunology business is performing well, with sales of a similar drug to Stella, TMFIA, increasing by 25% year-to-date [10]. - The oncology segment is particularly strong, with sales up 21% in the first half of the year, and projections indicating that J&J could become the leading cancer treatment company by 2030 with oncology sales reaching $50 billion [11][20]. - J&J has a robust pipeline with 13 drugs experiencing double-digit growth rates, which helps mitigate the impact of the loss of exclusivity for Stella [14][20]. Legal Challenges - J&J has been dealing with ongoing talc lawsuits, but recent changes in legal strategy have allowed the company to fight these cases individually, resulting in a better track record in court [16][17]. - The perception of the lawsuits has shifted, with some believing that the plaintiff's lawyers have overreached, contributing to a more favorable outlook for J&J [18][19]. Market Position and Valuation - J&J's stock is currently trading at a valuation below the market multiple, with a yield just under 3%, indicating potential for further growth [20]. - The company is on track to reach its all-time high of $186, with analysts suggesting it could surpass $200 in the near future [21].