Portfolio Activity

Although I have not written since beginning of June, I have been busy with my portfolio. I have added to some of my positions and initiated new ones. In this post I will quickly outline some of my moves.

• I have added to Dr. pepper (DPS) and I will continue to add to it. Wall Street and Media have taken extremely negative view on the company, see article here, that makes me more bullish on the company and its prospects. Most of the negatives discussed with regards to DPS is faced by Pepsi and Coke as well, so the discount to those names is not warranted. DPS actually came with strong quarter and improved its guidance for the future.
• I added to my International Index Fund and I will continue to add to it as a way for international diversification.
• I started buying Brookfield Properties. I have reviewed BPO in the past, see my post here, and I liked it but I was waiting for a better entry point, although I wanted buy in the $17-18 range, I decided to buy a little at $19 for few reasons:

• The sale of GM building at a record price should give some new higher valuation to new York class A office properties.
• The credit environment is improving therefore reducing the risk of their funding miss-match. Also Brookfield Asset Management will be a lender of last resort for them as they own a large piece of the the company.
• Replacement costs for buildings have gotten so much higher as higher commodities prices makes BPO's buildings a bargain in comparison.
• I like Real Estate, unique with high barrier to entry real estate, as a class and I think over the long term it should do well.

• I bought United Rentals (URI) @ $21.4 as a special situation investment. URI has announced a Dutch Auction to buy 1/3 of its outstanding shares between $22-25, so when the market traded at $21.4, I reckoned if someone will offer me a higher price in few days later, I will take that bet. Actually United Rentals is interesting for several reasons:
• It was slated to be sold to private Equity last year but the deal fell apart leaving URI with a hefty breakup fee.
• The company is undergoing a huge recapitalization buying back 1/3 of its outstanding shares and redeeming all their preferred shares and increasing their debt levels. The recapitalization can enhances equity returns and offer superior profits for the remaining shareholders. The remaining shareholders will be part of their own private equity deal.
• A lot of insiders and institutional purchasing the shares lately.
• The negative with this kind of business is that it is asset dependent. Most of its free cash flow will end up buying more assets to grow the business with nothing, if any, to show for shareholders' cash flow.
• I will look into this further but my main objective here is to tender at $24-25 making a quick gain for anywhere from 2.8-16%.

My plan going forward is to:

1. Accumulate more shares in the following businesses:
• Brookfield Properties
• Dr. Pepper Schewps
• Sears Holdings
• Lowe's
• FirstService Corp.
2. Analyze and decide if any of the following opportunities make sense to my portfolio, see a complete list here:
• Coach
• CB Richard Ellis
• TicketMaster Spinoff from IACI Interactive
• Prologis REIT
• Pacer International