- Election or removal of members of the Board of Directors
- Approval of financial statements and allocation of results
- Changes to bylaws and corporate policies
- Authorization for mergers, acquisitions and other corporate operations
- Definition of management compensation and dividend policy
Pocket Option: What are Common Stocks - In-Depth Tips to Maximize Your Investment in Brazil
Understanding common stocks is the first step for those who want to get rich in the Brazilian capital market. These tips not only provide fundamental concepts, but also practical strategies tested by Pocket Option analysts, paying special attention to the peculiarities of the Brazilian market and opportunities that few investors know about.
In the Brazilian investment universe, understanding what common shares are constitutes essential knowledge for any investor who wants to actively participate in the capital market. Identified by the suffix “ON” in B3 trading, these shares represent the most direct form of equity participation in publicly traded Brazilian companies, guaranteeing fundamental rights that transform the relationship between investors and companies.
This article, developed by Pocket Option specialists, offers an in-depth analysis of common shares in the Brazilian context, exploring their unique characteristics, practical functioning, competitive advantages, and specific strategies for different investor profiles. With the Brazilian stock market in a phase of expansion and maturation, mastering these concepts is crucial for building robust investment strategies aligned with local economic realities.
What are common shares: Essential fundamentals in the Brazilian context
Common shares represent fractions of the share capital of publicly traded companies, transforming their holders into real owners of the business, albeit in small proportion. This fundamental characteristic distinguishes common shares from other investments available in the Brazilian financial market, conferring specific rights and responsibilities.
In Brazil, common shares are easily identifiable by the suffix “ON” (Ordinary Nominative) after the company’s trading code. For example, PETR3 represents Petrobras’ common shares, while ITUB3 indicates Itaú Unibanco’s common shares. This standardized nomenclature allows Pocket Option investors to quickly identify the nature of the traded assets.
| Characteristic | Description in Common Shares | Impact for the Investor |
|---|---|---|
| Voting right | Active participation in business decisions | Direct influence on corporate governance |
| Suffix on B3 | ON (Ordinary Nominative) or number 3 | Clear identification in the home broker |
| Ownership | Real participation in share capital | Legal status as a company partner |
| Dividend distribution | Minimum of 25% of adjusted net profit | Passive income flow exempt from income tax |
| Tag along | Minimum protection of 80% in sale value | Safeguard in cases of hostile acquisition |
In the Brazilian corporate structure, what common shares are transcends the concept of simple financial assets; they confer on their holders legal status as partners, with all the rights and responsibilities established by the Corporation Law (Law 6.404/76) and the regulations of the Securities and Exchange Commission (CVM).
Fundamental rights of common shareholders in the Brazilian market
Understanding the rights linked to common shares is fundamental to correctly evaluate their potential as an investment in the Brazilian market. The Pocket Option platform emphasizes that these rights are regulated by law and represent significant advantages over other types of investments.
Voting right: The strategic differential of common shares
The right to vote at general meetings constitutes the most distinctive characteristic of Brazilian common shares. This right allows investors to directly participate in the company’s strategic decisions, including:
In the Brazilian context, it is essential to understand that the weight of the vote is proportional to the number of common shares held by the investor. Large institutional investors or controllers exert significantly greater influence on corporate decisions, a reality that small investors should consider when developing their investment strategies in Brazilian common shares.
| Right | Legal Basis | Practical Application in the Brazilian Market |
|---|---|---|
| Vote at meetings | Art. 110, Law 6.404/76 | Participation in strategic decisions, especially relevant in Novo Mercado companies |
| Mandatory dividends | Art. 202, Law 6.404/76 | Minimum receipt of 25% of adjusted net profit, with tax exemption |
| Tag along | Art. 254-A, Law 6.404/76 | Minimum protection of 80% (100% in Novo Mercado) in case of control sale |
| Preemptive right | Art. 171, Law 6.404/76 | Priority in subscribing to new shares, avoiding dilution of participation |
| Supervision | Art. 109, Law 6.404/76 | Access to corporate information and possibility to examine documents |
Remuneration and dividends: Exclusive tax advantages for Brazilian investors
For Pocket Option investors seeking passive income, common shares offer significant tax advantages. According to the Corporation Law, Brazilian publicly traded companies must distribute at least 25% of their adjusted net profit as mandatory dividends, unless there is a specific statutory provision.
In the Brazilian market, several companies establish more generous dividend policies, distributing percentages higher than the legal minimum. This factor, combined with the total income tax exemption on dividends for individuals, makes common shares of good dividend payers extremely attractive for long-term passive income strategies.
Common shares vs. preferred shares: Crucial differences in the Brazilian market
One of the most frequent doubts among beginning investors in Brazil refers to the differences between common and preferred shares. Understanding these distinctions is decisive for making informed decisions, aligned with specific financial objectives and appropriate to the Brazilian economic scenario.
| Characteristic | Common Shares (ON) | Preferred Shares (PN) | Impact on Investment Decision |
|---|---|---|---|
| Voting right | Yes | Generally no (with exceptions) | Fundamental for investors who value governance |
| Priority in dividends | No | Yes | Relevant for income-focused strategies |
| Priority in reimbursement | No | Yes | Important in liquidation scenarios |
| Tag along | Legal minimum of 80% | According to bylaws (may not exist) | Critical for protection in acquisition cases |
| Identification on B3 | 3 or ON (ex: VALE3) | 4, 5, 6… or PN (ex: PETR4) | Facilitates identification on trading platforms |
According to analyses by the Pocket Option team, historically, many common shares in Brazil traded at a discount relative to preferred shares due to the “control premium” — value attributed to the decision-making power concentrated in large shareholders. With the evolution of Brazilian corporate governance and the growing migration of companies to B3’s Novo Mercado, which requires the exclusive issuance of common shares, this difference has decreased significantly.
For the ordinary Brazilian investor, the choice between common and preferred shares should consider specific financial objectives:
- Investors who value participation in corporate decisions and governance find in common shares their ideal instrument
- Investors primarily focused on dividend maximization may prefer preferred shares in certain cases
- Companies listed on the Novo Mercado eliminate this choice by issuing exclusively common shares, simplifying the decision
The value of common shares: Specific determinants of the Brazilian market
Understanding what common shares are includes understanding how their value is determined in the Brazilian market. Unlike fixed income investments, the price of common shares oscillates constantly, influenced by multiple interconnected factors, many of them specific to the Brazilian economic and political reality.
Pocket Option analysts identify five main categories of factors that directly impact the value of common shares in Brazil:
| Category | Specific factors | Concrete examples in the Brazilian market |
|---|---|---|
| Corporate performance | Quarterly results, growth, operational efficiency | Positive reaction to Vale’s record margins in 2023, despite the fall in ore prices |
| Macroeconomic factors | Selic rate, inflation, exchange rate, GDP growth | Appreciation of retailers like Magazine Luiza after cuts in the basic rate |
| Corporate governance | Transparency, administrative practices, board composition | Value premium for Novo Mercado companies like WEG and Renner |
| Regulatory aspects | Legislative changes, sectoral regulations, fiscal policy | Impact of the New Gas Law on Petrobras and distributors’ shares |
| International scenario | Commodity prices, capital flows, global interest rates | Correlation between JBS/Marfrig shares and international meat prices |
In the specific case of Brazil, the sensitivity of the common share market to political factors and the international scenario is notably high, especially for exporting sectors and companies with significant debts in foreign currency. This vulnerability, according to Pocket Option technical analysis, creates both risks and unique opportunities for investors who understand Brazilian economic and political cycles.
Investment strategies in common shares adapted to the Brazilian reality
The decision to invest in common shares in Brazil should be aligned with clear financial objectives and well-defined time horizons. Pocket Option specialists recommend specific approaches, developed especially for the Brazilian market and its peculiarities.
Strategies by time horizon: Adaptation to the Brazilian economic cycle
The choice of the ideal strategy for investing in common shares in Brazil varies significantly according to the period that the investor intends to keep their capital invested:
- Short term (3-12 months): Focus on technical analysis, seasonal trends and specific catalysts such as agricultural harvests, major events and Brazilian political cycles
- Medium term (1-5 years): Combination of fundamentalist analysis with positioning in sectors benefited by Brazilian economic trends such as infrastructure and energy transition
- Long term (more than 5 years): Selection of companies with sustainable competitive advantages, low indebtedness in foreign currency and proven track record of successful navigation through Brazilian economic challenges
For long-term investors in Brazil, understanding what common shares are is particularly relevant due to the voting right, which allows monitoring and potentially influencing the strategic direction of companies over the years, protecting their investments during political and economic changes.
| Strategy | Characteristics | Exemplary Brazilian companies | Specific considerations |
|---|---|---|---|
| Value Investing | Focus on undervalued companies with solid fundamentals | Banco do Brasil (BBAS3), Transmissão Paulista (TRPL3) | Effective in periods of political uncertainty |
| Growth Investing | Companies with high growth potential | WEG (WEGE3), Localiza (RENT3) | Verify foreign exchange exposure and indebtedness |
| Dividend Investing | Focus on consistent dividends | Taesa (TAEE11), Enauta (ENAT3) | Advantageous due to Brazilian tax exemption |
| Index Investing | Replication of indices such as Ibovespa | ETFs like BOVA11, IVVB11 | Efficient diversification strategy |
| Sectoral analysis | Investment in specific sectors | Sanitation (SBSP3), Agribusiness (SLCE3) | Alignment with public policies |
Analyses conducted by the Pocket Option team indicate that, in the Brazilian context, hybrid strategies frequently produce superior results, combining elements from different approaches to adapt to the particularities of the local market: high volatility, significant political influence, commodity cycles and historically high interest rates.
Analysis of common shares: Methodologies adapted to the Brazilian market
To make informed decisions about investments in common shares in Brazil, it is fundamental to conduct analyses that consider the particularities of the local market. The main methodologies include:
| Type of analysis | Relevant indicators for the Brazilian market | Standout companies in this criterion |
|---|---|---|
| Fundamental Analysis | P/E, EV/EBITDA, ROE, Net Debt/EBITDA, foreign exchange exposure | WEG, Itaú, Ambev – history of solidity in various economic cycles |
| Technical Analysis | Supports/resistances, RSI, MACD, correlation with Ibovespa and dollar | Petrobras, Vale – high liquidity facilitates application of technical indicators |
| Sectoral Analysis | Market share, entry barriers, exposure to economic cycles | Rede D’Or, Assaí – resilient sectors in crisis periods |
| Governance Analysis | Board composition, policies for minorities, transparency | B3, Natura – pioneers in governance practices in Brazil |
In the Brazilian economic environment, characterized by frequent regulatory and macroeconomic changes, Pocket Option specialists recommend special attention to factors such as the company’s foreign exchange exposure, sensitivity to interest rates and ability to adapt to political and fiscal changes.
For investors who wish to deeply understand what common shares are in the Brazilian analytical context, it is essential to evaluate not only numerical indicators, but also qualitative factors such as management quality, history of navigation through economic crises and adaptability to constantly evolving regulatory scenarios.
The common share market in Brazil: Historical evolution and perspectives
The common share market in Brazil has experienced profound transformations in the last two decades. The creation of the Novo Mercado by B3 in 2000 represented a milestone in the evolution of Brazilian corporate governance, encouraging the exclusive issuance of common shares and significantly improving protection for minority investors.
- Companies listed on the Novo Mercado issue exclusively common shares
- 100% tag along guarantees full protection in cases of change of control
- Rigorous requirements for transparency and disclosure of information
- Conflict resolution via arbitration chamber, accelerating solutions
- Minimum free float of 25%, ensuring adequate liquidity
According to detailed analyses by Pocket Option, this movement towards better governance practices has contributed significantly to the long-term appreciation of Brazilian common shares, reducing the discount traditionally applied to them compared to preferred shares and attracting a greater volume of foreign capital.
Currently, the Brazilian common share market presents distinctive characteristics that investors should consider:
| Characteristic | Description | Practical examples in the Brazilian market |
|---|---|---|
| Shareholder concentration | High concentration of ownership, even in listed companies | Ermírio de Moraes family (Votorantim), Sicupira/Lemann (Ambev) |
| Sectoral composition | Predominance of commodities, financial and utilities | Vale, Petrobras and banks represent more than 30% of Ibovespa |
| Investor base | Expressive growth of individuals since 2018 | From 800 thousand to more than 5 million individuals at B3 in five years |
| Internationalization | Brazilian companies with growing global presence | JBS (largest meat processor in the world), WEG (electric motors) |
The perspectives for the common share market in Brazil are intrinsically linked to the country’s economic development and the structural reforms being implemented. The consolidation of a stable regulatory environment, the maintenance of interest rates at historically low levels and the advancement of fiscal reforms are potential catalysts for the appreciation of Brazilian common shares in the coming years.
Strategic fiscal considerations for investors in common shares in Brazil
The tax regime applicable to common shares in Brazil presents particularities that significantly impact the net profitability of investments. Pocket Option specialists highlight essential aspects that every investor should know to optimize results:
- Dividends completely exempt from Income Tax for individuals
- Capital gains taxed at 15% in normal operations or 20% in day trading
- Tax exemption for monthly sales up to R$ 20,000 in normal operations
- Interest on Equity (JCP) with 15% withholding at source
- Possibility of offsetting losses between operations of the same nature
| Taxable event | Rate | Tax optimization strategy |
|---|---|---|
| Capital gain (normal operations) | 15% | Strategically use monthly exemption limit of R$ 20,000 |
| Gain in day trading operations | 20% | Offset losses with gains within the same month or in following months |
| Dividends | 0% | Prioritize companies with solid distribution policies for exempt income |
| Interest on Equity (JCP) | 15% at source | Consider net JCP when comparing yields between companies |
| Stock lending (BTC) | 15% | Use as complementary strategy to monetize long-term positions |
By deeply understanding what common shares are in the Brazilian tax context, investors can structure fiscally efficient portfolios. For example, the strategic combination of dividend-paying shares (exempt) with tactical operations respecting the monthly exemption limit can significantly optimize net profitability, especially when compared to fully taxable fixed income investments.
Pocket Option analysts emphasize that maintaining detailed records of all operations is essential for the correct fulfillment of tax obligations related to investments in common shares in Brazil, especially considering the complexity of national tax legislation and its frequent updates.
Conclusion: Common shares as a strategic pillar for Brazilian investors
Understanding what common shares are and their specificities in the Brazilian market is fundamental to building successful investment strategies adapted to the local economic reality. As demonstrated throughout this analysis, these assets offer a unique combination of potential appreciation, income generation via exempt dividends and active participation in corporate decisions — characteristics that significantly differentiate them from other investments available in the Brazilian market.
The in-depth analysis conducted by Pocket Option specialists reveals that common shares play strategic roles in well-structured Brazilian investment portfolios:
- Inflationary protection: Companies with pricing power can pass on cost increases, preserving the real value of capital
- Effective diversification: Exposure to different economic sectors and international markets through exporting companies
- Exempt income: Dividends totally exempt from taxes provide regular cash flow with unique tax advantage
- Participation in development: Direct connection with Brazilian long-term economic growth
- Corporate influence: Right to participate in strategic decisions, strengthening governance
The Brazilian common share market, despite its traditional volatility, has demonstrated consistent maturation, with significant advances in corporate governance, transparency and protection for minority shareholders. These structural improvements, combined with the potential for Brazilian economic growth in the long term, create a promising scenario for investors who understand the particularities of this market.
For Pocket Option investors seeking strategic exposure to the Brazilian stock market, it is fundamental to remember that investment in common shares should be integrated into a diversified strategy, aligned with specific financial objectives and realistic time horizons. Continuous financial education, systematic monitoring of invested companies and discipline in executing the strategy are determining elements for success in investments in common shares in Brazil.
FAQ
What differentiates common shares from preferred shares in the Brazilian market?
Common shares (ON) confer voting rights at company meetings, allowing direct participation in corporate decisions. Preferred shares (PN) generally do not give voting rights, but offer priority in receiving dividends and in capital reimbursement. In Brazil, ONs are identified by the suffix 3 (like PETR3), while PNs use 4, 5 or 6 (PETR4). B3's Novo Mercado requires companies to issue only common shares.
What rights are guaranteed to common shareholders in Brazil?
In Brazil, common shareholders have the right to: vote at meetings; mandatory minimum dividends (generally 25% of adjusted net profit); tag along of at least 80% in case of sale of control (100% for Novo Mercado companies); preference in subscribing to new shares; and supervision of the company's business, as established by the Corporation Law (Law 6.404/76).
How does taxation work on investments in common shares in Brazil?
In Brazil, dividends received from common shares are totally exempt from Income Tax for individuals. Capital gains are taxed at 15% (normal operations) or 20% (day trading), with exemption for monthly sales up to R$ 20,000 in normal operations. Interest on Equity (JCP) is subject to 15% withholding at source. It is possible to offset losses with profits in operations of the same nature, optimizing the fiscal result.
What is the Novo Mercado and what is its importance for Brazilian common shares?
The Novo Mercado is a special listing segment of B3 that establishes the highest standards of corporate governance in Brazil. Companies listed in this segment issue exclusively common shares, offer 100% tag along, maintain at least 25% of shares in circulation (free float) and adopt additional transparency practices. This segment was fundamental to valuing common shares in Brazil, reducing the historical discount relative to preferred shares and attracting more institutional investors.
How can common shares contribute to a passive income strategy in Brazil?
Common shares are powerful instruments for passive income strategies in Brazil due to the total Income Tax exemption on dividends for individuals. Brazilian legislation requires minimum distribution of 25% of adjusted net profit, and many companies adopt more generous policies. Investors can build portfolios focused on companies with consistent track records of dividend distribution, such as utilities, energy transmitters and banks, obtaining regular cash flow with significant tax advantages compared to taxable fixed income investments.