Companhia Sanea (SBS)

[flatlander_60048]

Sometimes I like to look at the price chart on the SBS's website, it allows a better idea of historical performance without the currency minipulation noise seen in the ADRs.

http://quotes2.enfoque.com.br/sabesp/flash/pt/index.asp

As you can see we are still in the channel that extends back to January of 2013. Although, SBS is pushing the upper limits of the channel. It will be important to see it break out or else it could go back down into the 3's again. From what I can find in the way of charts this is the longest downturn that SBS has suffered. The +- 50% decrease (in Reals) has been typical of past downturns. It has been worse when the currency weakness is factored in. If SBS breaks out of the channel, I will quit trading around my core position. I did write some Jan $5 calls which might get taken out. However, I'm limited to less than 15% of my overall position. If I can make 6% every few months it helps even out some of the share price volatility.

Based on the September and early November rains and the El Nino playing out, I'm hopeful that alot of the drought pressure is going to come off the table. As you have indicated, I think SBS is just one of those stocks that you need to maintain a long horizon on.

I have had decent luck in the past with ADRs that seemed to trade at a discount to USA peers. Held a lot of NVS but unloaded about 2/3 of my position earlier this year when it broke $100. I still like their leadership position in Biogenerics but the patent cliff on their branded drugs became too much of an anchor. At least with water and sewerage the threat from competition is remote.

Good Luck
FL