Investing in the Rio Olympics

When the International Olympic Committee announced Beijing would be the venue for the 2008 Summer Games, Chinese investments flourished.

A combination of hype and fundamentals drove this spectacular rally. Investors who bought on the news and sold as the hype reached fever pitch only months before the games began were handsomely rewarded.

Now with almost seven years until the 2016 Summer Olympics opening ceremony in Rio, it’s Brazil’s turn to make early investors rich yet again.

We already have an over-the-counter Brazilian stock in our portfolio — and it’s been on quite a run over the last couple of days. But before we get to the details, it’s important to discuss just how powerful a force an event such as the Olympics can be. Sure, it’s an international spectacle. But it’s also an economic boon to the entire host city and nation.

Take China, for instance. The city of Beijing spent $40 billion… just on venues and infrastructure. Beijing also released numbers that showed massive GDP expansion during the run-up to the games. Already growing at breakneck pace, the “Olympic factor” added more than 1% to year-over-year GDP growth.

Many investors are already displaying their exuberance, sending Brazilian names higher after the Olympic committee announcement. We’ll be betting on the hospitality and restaurant industries, which will be in full-on expansion mode in preparation for the 2016 games. Our play in this sector in the Bulletin Board Elite portfolio has showed us a strong bounce in October, rising more than 50%.

The Daily Reckoning