Long River Holding

$GIS $CPB $KHC the entire packaged-food / consumer-staples sector is under pressure right now. During the inflation period (2021–2023), companies like Campbell and General Mills raised prices aggressively. Now consumers are reacting. People buying cheaper store brands, Switching to discount retailers, and Eating less packaged food. Also, Consumers now think: “Why pay for brand cereal or soup?” This weakens the moat of old packaged food companies. What a time.

$EWZ $PBR $VALE $NU $ITUB $PBR.A Brazil does not need to become the next United States. Its companies do not need to deliver extraordinary growth. Commodities do not need to enter another supercycle. The Brazilian real does not need to return to its historical highs. And the government does not need to suddenly become fiscally flawless. What needs to happen is much simpler: expectations need to normalize. If Brazilian earnings grow, the Brazilian real appreciates moderately, interest rates begin to fall without destroying real returns, fiscal credibility improves, and global capital begins looking beyond an increasingly expensive United States market, Brazil has the potential to move from being merely “cheap” to being re-rated. That is the asymmetry I find interesting. At roughly $38, the fund does not need a heroic outcome to work. Around $45 can be explained by earnings normalization. Around $50 can be explained by earnings growth, a stronger Brazilian real, and modest multiple expansion. Getting toward $55–$60 requires something more consequential: a genuine decline in Brazil’s risk premium and a market willing to price Brazilian assets as if the worst of the macroeconomic discount is behind them. The risk, of course, is that the market is not wrong. Brazil could remain fiscally undisciplined, the Brazilian real could weaken, interest rates could remain restrictive, commodities could disappoint, and the earnings recovery could fail to materialize. A cheap market can remain cheap for a very long time. I am not betting that Brazil suddenly becomes exceptional. I am betting that Brazil only needs to become less bad than the market currently expects. And if that happens while the United States dollar enters a weaker cycle and global capital starts searching for neglected markets, the return does not have to come from one extraordinary variable. It can come from three ordinary improvements occurring together: That is the real Brazil trade. Not a bet on Brazil’s distant future. A bet on the possibility that, over the next 12–36 months, the world begins to price Brazil differently. Onto the next one. Hope you all enjoy this.

$EWZ Investment Thesis: I Think Brazil Is Being Priced for Too Much Permanence I have been looking at Brazil differently lately. The obvious way to think about the country right now is through the 2026 presidential election, especially with the race between Lula and Flávio Bolsonaro becoming increasingly competitive. But the more I look at it, the less I think the election itself is the core investment thesis. For me, the more interesting question is much simpler: how long can Brazil realistically remain trapped in an economy where the policy interest rate is 14%? That is what makes EWZ interesting to me. Brazil has already started cutting rates. The Selic rate has come down from 15% to 14%, while July inflation fell to 4.44%. The economy is also showing signs of slowing under the weight of restrictive monetary policy. None of this means Brazil has solved its inflation or fiscal problems, and I don’t think we should pretend it has. But it does tell me that the direction of travel has started to change. The question is whether this becomes a shallow easing cycle or something much larger. That distinction matters enormously for equities. If Brazil only moves from 14% to 13.5%, I don’t think there is a huge investment opportunity here. But if Brazil can eventually get closer to 11–12%, the economics become very different. Lower interest rates don’t just make borrowing cheaper. They change the value investors assign to future cash flows, improve credit conditions, support domestic demand, reduce the government’s interest burden and potentially lower the risk premium investors demand from Brazilian assets. You can therefore get a combination of better earnings and a higher valuation multiple without requiring Brazil to suddenly become a high-growth economy. That is the part of the thesis I find attractive. EWZ is already relatively inexpensive. At around $34, I am not paying a premium valuation and hoping that Brazil suddenly produces spectacular growth. I am buying a basket dominated by banks, energy, materials and utilities at a valuation that already reflects a substantial amount of skepticism. If normalized earnings grow moderately and the market becomes willing to pay even 12–13 times those earnings instead of roughly 10–11 times, the return can become meaningful. If the Brazilian real also strengthens as the interest-rate and risk-premium story improves, the upside for a United States investor becomes even more interesting. The political situation is where things get more interesting, but I see it as an accelerant rather than the foundation of the trade. Lula obviously wants lower interest rates. It would be politically beneficial for him to enter the next phase of his presidency with stronger growth, cheaper credit and better economic sentiment. But wanting lower rates is not the same thing as creating the conditions for sustainably lower rates. Brazil’s problem has never simply been that its central bank refuses to cut rates. The harder problem is fiscal credibility and inflation expectations. If government spending and debt dynamics keep convincing the market that inflation will remain elevated, the central bank cannot simply declare victory and take rates down to 10%. That is the part of Lula’s presidency that I am watching most closely. I don’t need him to suddenly become a fiscal hawk. I need him to recognize the constraint imposed by the bond market and do enough to stabilize expectations. If he does that, Brazil can normalize even under Lula. If he doesn’t, the country could remain stuck with high rates and cheap equities for years. Flávio Bolsonaro introduces another possible path. If a Flávio victory were accompanied by credible fiscal reform, a more market-friendly economic policy and lower long-term interest rates, the equity market could rerate very quickly. But I don’t want my investment thesis to depend on that outcome. Political promises are easy; implementation is much harder. The important question is ultimately what happens to inflation expectations, government debt and the long end of the Brazilian yield curve. This is also why the hedge-fund activity caught my attention. Several major hedge funds appeared to have significant EWZ call exposure in their second-quarter 2026 filings. Ken Griffin’s Citadel, Stanley Druckenmiller’s Duquesne Family Office, Paul Tudor Jones’s Tudor Investment Corporation and Israel Englander’s Millennium Management all showed meaningful call exposure. I don’t think we should blindly interpret those filings as “the world’s smartest investors are bullish on Brazil,” because Form 13F data don’t tell us the complete structure of an options position. A reported call can be part of a spread, hedge or volatility strategy. But I still find the concentration interesting. If multiple sophisticated investors independently wanted convex exposure to Brazil during the same quarter, there is at least a possibility that they are seeing something beyond the presidential election. One explanation is that they are positioning for a change in Brazil’s interest-rate regime. If the market continues to price Brazil as a permanently high-rate economy while inflation and economic activity continue improving, the upside from a repricing could be much larger than the downside implied by today’s valuation. And that is exactly why I prefer thinking about EWZ through cost of capital rather than politics. The bear case is straightforward. Brazil could simply prove that its high real interest rates are structural rather than cyclical. Fiscal deficits could remain too large, debt could continue increasing, inflation expectations could stay elevated, and the central bank could be forced to keep monetary policy restrictive. In that world, Brazilian equities could remain cheap without ever becoming good investments. A global risk-off environment, weaker commodity prices, a stronger United States dollar or political deterioration could make the situation even worse. I don’t dismiss that possibility. In fact, I think that is the biggest reason EWZ is cheap in the first place. But that is also where I see the asymmetry. At approximately $34, I don’t need Brazil to become exceptional. I need the market to be too pessimistic about how permanent today’s conditions are. My base case is that Brazil gradually normalizes. Inflation continues to moderate, Selic eventually moves toward roughly 11–12%, economic growth remains positive, and long-term yields gradually decline. Under that scenario, I think $EWZ can reasonably move toward the mid-$40s. A more favorable outcome involving meaningful fiscal improvement and a stronger monetary easing cycle could push it into the 50s. On the other hand, if fiscal deterioration becomes severe and Brazil remains trapped at extremely high real interest rates, I could see EWZ falling toward the high-$20s or low-$30s. That gives me a distribution that I find attractive at today’s price. What makes the trade particularly interesting is that the upside doesn’t require a single heroic assumption. I don’t need Lula to lose. I don’t need Flávio to win. I don’t need commodities to explode. I don’t need Brazilian companies to suddenly grow at 20% a year. I need several relatively ordinary things to happen at the same time: inflation continues moving in the right direction, interest rates eventually decline, fiscal conditions stop deteriorating, earnings remain resilient, and investors become willing to assign Brazil a slightly less punitive valuation. If those things happen together, I think the market can move much further than the underlying earnings growth would suggest. That is ultimately why I am interested in EWZ. I am not betting that Brazil suddenly becomes a great country. I am betting that Brazil eventually becomes less expensive to finance. And if the market has already priced in most of the pain from today’s high-rate environment, a normalization of the cost of capital could create a surprisingly large equity rerating. For me, EWZ at around $34 is therefore not a “Brazil will boom” trade. It is a mean-reversion trade with political optionality. The election can accelerate the outcome, but the deeper thesis is that 14% interest rates are unlikely to be the permanent equilibrium for Brazil. If I’m right, I think the upside can be substantial. If I’m wrong, the valuation and dividend yield of $EWZ give me at least some protection. And that combination—a relatively cheap starting point, a potentially meaningful decline in the cost of capital, and a catalyst that could accelerate the repricing—is what makes the risk/reward interesting to me. I added more today. Onto the next one.

While retail markets indiscriminately sold off Inter & Co ($INTR) in early 2026—hammering the equity down nearly 38% year-to-date into the $5.30–$5.50 range—institutional capital seized the liquidity window to build multi-million share stakes. This severe disconnect between short-term market pricing and fundamental execution marks a classic valuation anomaly. Unlike pure-play digital monoline lenders, Inter operates a full financial ecosystem in Brazil across seven integrated verticals: core checking, credit, investments, insurance, shopping/cashback, cross-border payments, and SME services. Inter's primary competitive advantage is its low cost of funds. By capturing roughly 9% of all Pix payment transactions in Brazil, Inter collects billions in low-to-zero cost floating deposits, expanding total deposits to R$77.2 billion (+24% YoY) in Q2 2026 while holding funding costs steady at 65.9% of the CDI benchmark rate. Operating leverage across the income statement is compounding at an exceptional pace. In Q2 2026, Inter reached its long-term "Rule of 50" framework goal ahead of schedule, delivering 32% YoY Net Revenue growth (to R$2.6B / $509.5M) alongside a record 16.3% ROE. Fixed technology overhead stayed flat while active clients reached 26.4 million (out of 45.3 million total clients), pulling the Efficiency Ratio down to an all-time low of 42.1% as revenue growth (+32%) vastly outpaced expense growth (+19%). Hyper-personalized credit repricing and a pivot toward revolving card balances drove a 64% YoY surge in card interest income, expanding Net Interest Margin (NIM 2.0) past double digits for the first time to 10.1%. Inter’s balance sheet crossed R$100 billion in total assets for the first time in mid-2026, backed by an expanded loan portfolio of R$55.4 billion (+29% YoY). Crucially, roughly 70% of the core credit book is collateral-backed by real estate, public payroll loans (consignado), or fixed securities, insulating the bank against macro shocks. While non-performing loans (>90 days) ticked up to 5.1%—concentrated in private payroll seasoning—an allowance coverage ratio of 134% and a holding-company Basel ratio of 19.3% (with R$2.3 billion in excess capital) provide a thick buffer against credit risk. From a cash flow and capital allocation perspective, Inter achieved capital neutrality in mid-2026. The bank now generates more capital organically through earnings than it consumes to fund its ~29% credit portfolio growth, eliminating the threat of equity dilution to support expansion. This self-sustaining profitability organically funds high-margin growth vectors, including its newly opened regulated Miami branch launched in June 2026 to capture LatAm-US cross-border payment corridors, as well as the rollout of Seven, its proprietary multi-agent AI engine currently serving over 6 million active users. Macroeconomic and operational catalysts further reinforce the long-term thesis. To address private payroll delinquency head-on, management launched a dedicated private payroll insurance product in August 2026 to improve risk-adjusted returns and curb credit provisioning. Furthermore, as Brazil’s Central Bank (BACEN) manages its Selic rate-easing cycle, lower policy rates reduce deposit funding expenses while lowering consumer debt service stress. Compressed at single-digit earnings multiples despite printing 13 consecutive quarters of net income growth, Inter & Co presents an asymmetric re-rating opportunity as Wall Street eventually catches up to its fundamental reality.