Opinion – Marcos de Vasconcellos: Nubank or Magalu? Where is the opportunity of your life?

Petrobras, Vale and Ambev. These are the only three companies on the Brazilian stock exchange that are worth more than Nubank, in market value, right now.

The digital bank, known for its purple card and advertising aimed at young people, debuted on the NYSE (New York Stock Exchange) this week worth US$41.4 billion (R$230.8 billion). For comparison purposes, Petrobras is worth R$382.8 billion.

On the Brazilian stock exchange, the digital bank started to trade BDRs, which are papers issued here representing its shares on the New York Stock Exchange. And this Thursday (9/12), its first trading day, the papers (NUBR33) have already increased by more than 17%.

On the same day, Magazine Luiza, the retailer that won the hearts of many investors in 2020, registered a drop of around 8%. In six months, MGLU3 shares have already plummeted by nearly 70%.

The precipitous drop in Magalu shares comes just over a year after its meteoric rise. Since when it hit rock bottom, in March 2020, until November of the same year, the shares have more than doubled in value (an increase of 25%). They are now 17% cheaper than at what appeared to be the bottom of the pandemic.

And the reason for this tremendous rise of Magalu back there is precisely what makes Nubank appetizing for investors today: the company showed itself prepared for the digital world, at a time when its competitors were dependent on analogue life.

Still far from that metaverse —which today already involves its own digital currencies, big brands and even investment funds— Magazine Luiza showed that it could sell online and had the capacity to deliver purchases. In times of pandemic lockdown, little has proven more essential to a brand’s survival.

Over time, its competitors managed to adapt to the digital world and people returned to circulating in physical stores. Now, playing on the same court, retailers have been feeling severe pain from inflation and interest rates.

Inflation has affected the entire production chain and, as it is not possible to pass it on to the consumer all the time, it ends up eroding the profit margins of the chains. And the increase in the interest rate (with the prospect of increasing even more) has made many people postpone the purchase of items such as appliances and furniture, which have a great weight in the accounts of companies such as Magalu and Via, which own the Casas Bahia and Ponto chains.

Nubank, in turn, is also where its competitors failed to reach: it is an effectively digital bank, it does not depend on the high cost of branches, nor does it suffer labor risks from those who employ almost 100,000 people, such as Itaú or Bradesco.

And the same rise in interest rates that punishes retailers today is good for banks, as it allows for an increase in the spread, which is where money is effectively made in the financial market. And investors saw in Nubank the opportunity to be well positioned in a good moment for the sector.

Anyone paying attention to trends can surf the short-term waves. But the opportunity of a lifetime is to understand that the market behaves in a cyclical way and that the curves of a chart tend towards the averages.