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Author: ultimatespinach Three stars, 500 posts Feste Award Nominee! Old School Fool Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 207  
Subject: Re: revised target price Date: 7/4/2012 3:26 PM
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Given that BIP is now over $34, and your last stated target price range was $30-$33, what do you now consider fair value? This question especially is coming up in light of the recent recommendation to buy more.
Are we perhaps now really more of a HOLD than a BUY?
Is there a point when you'd say take the money and run?


Menachem, the final re-rec before Global Gains went dark was not for BIP but for BAM. BAM is the umbrella asset manager; BIP is one of a growing number of subsidiary firms one can think of as sector funds except that instead of investing in companies, they invest directly in hard, cash-producing assets, often owning and operating them as well.

BIP's sector, of course, is infrastructure. With many governments around the world beginning the painful process of getting overleveraged books in order, Bruce Flatt, the CEO of BAM, expects numerous opportunities to invest in and/or acquire publicly-owned infrastructure assets at attractive prices over the next decade.

So while I believe that BIP is approximately fairly valued at present, I also think it offers significant growth opportunities over the medium to long term. At the same time, it pays distributions from recurring cash flow in excess of 4 percent annually.

At a time of infinitesimal interest rates when cash earns basically nothing, I think BIP offers an attractive combination of income and growth. I view it as a long-term holding. If I didn't own it, I would slowly build a position over time so as to increase the chances of getting better prices along the way if the market as a whole takes it down.

BAM is probably a better buy here, but Brookfield will also be offering American investors the opportunity to invest in two other subs it intends to list on the NYSE in the second half of this year. One, in commercial real estate, will be a spinoff from BAM (as BIP was), so if you own BAM you will be issued a small foothold in the new entity automatically. The other, in renewable energy (mostly hydroelectric generating stations around the world), is currently listed only in Toronto but plans to apply for a New York listing by the end of the year. Personally, I'm planning to focus additional near-term Brookfield investments in those entities when they come online. So I'm treating both BAM and BIP as holds at this point.

Hope that helps.
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