The Colombian stock market has entered an unprecedented phase
of structural divergence, characterized by a benchmark index, the MSCI COLCAP,
reaching nominal highs for more than a decade while several fundamental issuers
remain at valuations typical of a deep crisis cycle. This dichotomy offers an
exceptional study scenario for the financial economist seeking assets in the
"downward part of the cycle," understanding this concept not only as
a depression in the share price, but as a gap between the intrinsic value of
assets and their market price, exacerbated by transitory macroeconomic factors
and perceived risks that could dissipate by 2026.
Macroeconomic Environment: The Catalyst for Cycle Reversal
To identify companies in the downward part of the cycle, it
is imperative to analyze the interest rate environment and monetary policy. The
Colombian economy has navigated a period of "fiscal dominance" where
public spending and the deficit, projected at 7.1% of Gross Domestic Product
(GDP) by the end of 2025, have limited the Central Bank's ability to reduce
interest rates more rapidly. At the end of December 2025, the monetary policy
rate remained at 9.25%, a figure that represents a very high real intervention
rate, considering that inflation has shown a trend of convergence, albeit slow,
towards the target range.
This high-interest-rate environment has kept valuations
depressed in capital-intensive and credit-sensitive sectors, such as
construction, infrastructure, and retail finance. However, projections for 2026
suggest that the monetary easing cycle could deepen once post-minimum wage
adjustment inflation expectations stabilize. This would act as the main driver
of a revaluation or "re-rating" process for companies currently
trading at significant discounts to their book value.
The 2026 Minimum Wage Shock and its Impact on the Operating
Cycle
A disruptive event that marks the beginning of the 2026 cycle
is the 23% increase in the current legal monthly minimum wage (SMMLV),
implemented by the government after a lack of agreement between business
associations and unions. For a rigorous financial analysis, this increase must
be weighted alongside the reduction in the legal working day, resulting in an
effective increase in hourly labor costs of 28.5%.
This cost shock impacts issuers on the Colombian Stock
Exchange (bvc) differently. Companies with high labor density and low pricing
power are currently at a negative inflection point in their operating cycle.
However, for value investors, this "maximum pessimism" scenario often
marks the bottom of valuations, especially for companies that have already
initiated operational efficiency and automation plans to mitigate margin
erosion.
The Construction and Infrastructure Sector: The Nadir of the
Cycle
The construction sector has been unanimously identified by
analysts as one of those still "in the shadows" of the economic
cycle. The combination of high financing costs for homebuyers and rising input
costs has driven issuers in this sector to historically low valuation levels.
Constructora Conconcreto (CONCONCRET)
Conconcreto represents a paradigmatic case study of an asset
at the downside of the cycle. Despite a one-off appreciation driven by
favorable arbitration rulings related to the Hidroituango project in 2024, the
stock continues to trade at a significant discount to its equity.
An analysis
of its fundamentals reveals an operational resilience that the market seems to
ignore. The company closed the period with a backlog (contracts to be executed)
of 3.5 trillion pesos, guaranteeing approximately 3.5 years of execution at a
rate of 1 trillion pesos annually. Geographic diversification is a key factor;
35% of this backlog is located in South Florida (USA), providing a cash flow in
dollars that acts as a natural hedge against the volatility of the Colombian
peso. With consolidated net income that has managed to remain positive despite
the contraction of revenues in specific segments, Conconcreto is an asset that
could experience a cyclical upswing as mortgage interest rates decline and
investment in public infrastructure picks up.
Construcciones El Cóndor (ELCONDOR)
El Cóndor is experiencing even more pronounced cyclical
stress, having registered devaluations of nearly 20% in recent periods. The
company has It has faced significant challenges in its capital structure due to
the leverage required for fourth-generation (4G) projects. However, its
position as one of the country's leading road infrastructure builders suggests
that any shift in state investment policy or an improvement in debt refinancing
conditions could generate a considerable technical and fundamental rebound,
starting from an extremely depressed valuation base.
Financial Sector: Between Recovery and Technical Lag
The Colombian financial sector has shown an asymmetric
recovery. While market leaders have managed to defend their
margins, certain issuers have lagged behind, offering attractive entry points.
Davivienda
(PFDAVVNDA)
Davivienda's
preferred stock has been categorized by various brokerage firms as a
"laggard" in the market. During 2025, the bank faced a challenging environment marked
by the deterioration in the quality of its consumer loan portfolio and the need
to increase provisions, which severely impacted its return on equity (ROE).
However, from a cyclical perspective, Davivienda is in the final phase of its
loan portfolio cleanup. The normalization of interest rates in 2026 should
alleviate funding costs and improve the repayment capacity of retail borrowers,
allowing for an expansion of intermediation margins. Technically, the stock has
traded in a short-term bearish scenario until it breaks above the resistance
level of 26,084 pesos, but support levels
However, from a financial
economist's perspective, Ecopetrol presents three supporting factors: 1.
Dividend Sustainability: Despite the drop in profits, the company maintains
robust EBITDA generation (12.3 trillion pesos in Q3 2025) and an ambitious investment
plan for 2026. A dividend yield of up to 20.2% is projected for 2026, acting as
a powerful value attraction for income investors. 2. Operational Efficiency:
Improved refining margins and a reduced deficit in the Fuel Price Stabilization
Fund (FEPC) have strengthened operating cash flow. 3. Political Cycle: With the
2026 election period approaching, the market could begin to price in a more
benign regulatory environment for the hydrocarbons sector, which traditionally
leads to an expansion of multiples for the state-owned company. Promigas
(PROMIGAS) Promigas has been one of the weakest components of the COLCAP index
in terms of price performance during 2025, with a cumulative decline of 14.9%. This
weakness appears to ignore the stability of its cash flows, which are linked to
the transportation and distribution of natural gas, a critical asset for the
country's energy security. With a P/E ratio of 6.57x and a dividend yield
exceeding 8.6%, Promigas is an ideal candidate for a cycle reversal study,
especially if new regasification projects materialize or the roadmap for gas
supply in Colombia becomes clearer.
*Note: Promigas' P/B reflects the
accounting valuation of its long-term concessions.
The
Reconfiguration of Business Groups: Grupo Sura and Grupo Argos
The process of dismantling the
cross-shareholdings in the former Grupo Empresarial Antioqueño (GEA) has been
the main driver of value discovery in the Colombian market during 2025. This
process, although it has already generated significant appreciation, still
leaves room for analysis of assets that present "hidden value" after
the spin-off.
Grupo Argos and
the Focus on Infrastructure
Following Nutresa's exit and the
spin-off of its stake in Grupo Sura, Grupo Argos has transformed into a pure
infrastructure holding company, with three clear pillars: Cementos Argos,
Celsia (Energy), and Odinsa (Concessions). The company has delivered the
equivalent of 10.8 trillion pesos in Grupo Sura shares to its shareholders,
drastically simplifying its balance sheet. Despite a projected 47% appreciation
by 2025, Grupo Argos' common stock is still trading below what analysts
consider its intrinsic value, especially after the implementation of the
"SPRINT" program at Cementos Argos and the aggressive share buyback
program totaling up to 1 trillion pesos on a consolidated basis. The estimated
book value of the stock is around 15,000 pesos, but the EBITDA generation of
its subsidiaries, such as Cementos Argos USA, suggests that the market price
does not yet reflect the long-term free cash flow potential.
Grupo Sura and
Financial Consolidation
Grupo Sura has positioned itself
as a leading financial services holding company in the region, eliminating the
holding discount that the market applied when it held stakes in food and
construction materials. The reduction in free float following the cancellation
of treasury shares and the greater visibility of its earnings per share (EPS)
are catalysts that should continue to boost the stock in 2026. As with Argos,
Sura's preferred shares maintain a greater discount to their economic value
than its common shares, representing a technical arbitrage opportunity for
long-term analysis.
Quantitative
Valuation: Discount Models and Historical Multiples
To determine if a company is
truly at the bottom of the cycle, it is necessary to apply valuation models
that isolate macroeconomic noise. A common approach is Tobin's Q analysis,
adapted to the local market, or the Dividend Discount Model (DDM) under the
assumption of a reversion of rates to the historical average.
Applying the
Gordon Model to Leading Issuers
Considering a risk-free rate (Rf)
based on 10-year TES bonds (approximately 11.8% in December 2025) and an equity
risk premium (Rg) of 6%, the required discount rate (Rg) for the Colombian
market is close to 17.8%.
If we apply this model to a
company like Bancolombia (Preferred Shares), with a projected dividend of
$5,107 for 2026, the current market price implies an extremely conservative
perpetual growth rate (Rg) even negative. This suggests that if the Colombian
economy manages to stabilize its real growth around 3% and inflation converges
to 3% (nominal growth of 6%), current valuations offer a significant margin of
safety compared to the historical average of the multiples over the last 10
years.
Technical
Analysis and Critical Support Levels
For the financial economist, the
entry point is as crucial as the fundamental thesis. The Colombian market has
shown unusual volatility, with the COLCAP index facing psychological resistance
at 2,120 points.
Support and
Resistance Dynamics for 2026
1. MSCI COLCAP: The index
should watch the critical support at 2,007 points. A break below this level
could indicate a deeper correction towards the demand zone of 1,870-1,900
points, which would constitute an aggressive buying opportunity for quality
assets.
2. Mineros (MINEROS): This
stock has been the "champion" of 2025 with a rise of over 250%. It is
not currently at the bottom of the price cycle, but its analysis is relevant as
a hedge. Its support levels are at 14,125 pesos. If the price of gold corrects
or local risk appetite fades, this asset could offer technical entry points at
its 200-period moving average.
3. Grupo Energía Bogotá (GEB):
After a 6.6% drop in December 2025, GEB is in a critical support zone at 2,920
pesos. Weakness below this level would be worrisome, but as long as it holds,
it offers an accumulation opportunity with an expected dividend yield of 10.6%
for 2026.
4. Colombian Stock Exchange
(BVC): The BVC's stock shows a "strong buy" signal in its
long-term technical indicators (14-day RSI at 68.4), despite being far from its
all-time highs. Its critical support level is at 13,110 pesos.
Regional
Integration: An Exchange and the Liquidity Shock
A structural factor that could
lift many Colombian companies out of the bottom of their valuation cycle is the
integration of the Chilean, Peruvian, and Colombian stock exchanges under the
Nuam Exchange brand. Historically, the Colombian market has suffered from
"liquidity anemia," which has prevented prices from reflecting
fundamentals.
It is expected that, by 2026, the
single trading platform will be fully operational, allowing institutional
investors in the region and global funds simplified access to Colombian
issuers. This potential increase in average daily trading volume (which already
recovered to 127 billion pesos in 2025) could be the catalyst for valuation
multiples to converge toward emerging market averages.
Capital Flows
and Rebalancing
The market anticipates potential
buying flows in future rebalancing of local and international indices (MSCI,
FTSE) due to the increased free float of companies like Grupo Sura and Grupo
Argos following their spin-offs. These rebalancing’s force passive funds to buy
shares, generating upward pressure that typically benefits common stocks first
and then filters down to preferred stocks, which currently offer the deepest
discounts.
Risks and
Considerations for the 2026 Cycle
No cycle analysis is complete
without considering the risks that could prolong the stay of assets at low
levels.
1. Fiscal Risk:
Non-compliance with the fiscal rule or a further deterioration of the deficit
could put upward pressure on TES (Colombian Treasury Bond) rates, raising the
discount rate and reducing the present value of shares.
2. Political
Uncertainty: The proximity of the 2026 presidential elections will
generate volatility. Historically, the Colombian market tends to decline in the
months leading up to the election, offering windows of opportunity for those
with a long-term thesis on the country's institutional resilience.
3. Pressure on
Margins (Minimum Monthly Wage): The 23% increase in the minimum wage is
a real challenge to corporate profitability. Companies that fail to implement
operational efficiencies will see declines in their net income, which could
turn the current "cheap" market into a value trap.
Study
Conclusions and Recommendations
From the perspective of a
financial economist with extensive experience, the Colombian stock market at
the close of 2025 offers one of the clearest valuation opportunities in the
recent history of emerging markets. While the COLCAP index reflects a partial
recovery, the market's microstructure shows fundamental assets trading at a
fraction of their historical and replacement values.
Summary of
Assets in the Lower Part of the Cycle for Study:
• High Priority (Extreme
Valuation): Conconcreto Construction and El Cóndor Construction. The risk
is high due to the cyclical sensitivity of the construction sector, but the
discount to equity and the potential for infrastructure reactivation are at
their maximum.
• Medium-High Priority
(Financial Recovery): Davivienda and Grupo Aval. The thesis is based on the
convergence of interest rates and the normalization of loan loss provisions
toward the second half of 2026.
• Medium Priority (Dividends
and Hidden Value): Ecopetrol and Grupo Argos. The combination of
double-digit dividend yields and corporate simplification processes (spin-offs,
buybacks) provides a solid technical floor and a clear valuation catalyst.
• Technical Priority
(Utilities Laggards): Promigas and GEB. Defensive assets that have lagged
behind in the 2025 rally, offering stable cash flows and valuations below their
regional peers.
The year 2026 will reveal whether
the Colombian Stock Exchange manages to transform its intrinsic potential into
market reality. For market analysts, the key lies in selectivity, prioritizing
companies with pricing power to weather the wage shock and those that, after
decades of complex corporate structures, finally present themselves to
investors with clean balance sheets and a total focus on their core business.
The downturn is, by definition, the most uncomfortable time for capital, but it
is precisely there that the seeds of extraordinary returns for the future
expansionary cycle are sown.
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