Wednesday, November 20, 2019

A Current AIM International Equity Holding: Wheaton Precious Metals (WPM, $28.36): “Back To Gold We Go”


Wheaton Precious Metals (WPM, $28.36): “Back To Gold We Go”
By: Alec Feygin, AIM Student at Marquette University


Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

Summary:
  • Wheaton Precious Metals, Corp. (NYSE: WPM) is a mining company which generates its revenue primarily from the sale of precious metals. The three main precious metals are: Gold, Silver, and Palladium.
  • Wheaton currently has streaming agreements covering 19 operating mines and 9 development state projects.
  • Wheaton’s portfolio has over 30 years of mine life based on reserves.
  • Top rated among ESG analysts and Is the first streaming company to join UN Global Compact. UN Global compact is the largest sustainability initiative in the world.
  • Wheaton offers the highest dividend yield amongst streamers.

Key Points:

Wheaton Precious Metals considers itself a “High Margin Precious Metals Company”. WPM is a streaming company which means that it invests in mining operations upfront and gets a fixed percentage of the output of a mine at a predetermined price. WPM partners with many different mining companies including the two largest: Newmont Goldcorp and Barrick. The streaming market is growing and is currently at about $21 billion, and WPM makes up 45% of the total market. There are many advantages of the streaming model for both miners and WPMs shareholders. One noteworthy advantage is that we provide support to our partners, but they keep all operational control. This way both companies can benefit by using the expertise of the other without having to spend any extra money. Gold prices have steadily been increasing since 2016. We know that these prices are influenced by geopolitical factors as well as how much gold supply is out there. WPM is set to benefit tremendously from this increase in gold prices because most of our assets are going to gold production.

What has the stock done lately?

The company’s stock price has been flat in the last month. It is currently trading at $26.28 with an average price target of $34.40. The company missed its earnings last quarter and will have its next earnings call on November 18th.

Past Year Performance:

Wheaton’s stock has had an amazing 2019, it is currently up 29% YTD. With the uncertainty in the world caused by the U.S-China trade war, many investors have fled to Gold as a safe haven. This has increased both the value of the companies in the sector and the price of gold. I believe that the stock still has room to grow but the next earnings call will shed a lot of light on its continuing operations throughout the world.

Source: FactSet

My Takeaway:
The increase in the price of gold is a big positive for shareholders of WPM. Since most of the assets that WPM has are long term gold mines, they are set to benefit from this trend in gold prices for the foreseeable future. I believe that WPM has positioned itself as winner in this space for the foreseeable future and therefore I recommend that the aim profile holds on to its position in WPM.

Source: FactSet

A Current AIM Small Cap Equity Holding: New Relic, Inc. (NEWR, $65.51): “In a Rut, But Looking Up”


New Relic, Inc. (NEWR, $65.51): “In a Rut, But Looking Up”
By: Nicholas Rohrer, AIM Student at Marquette University


Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

  • New Relic, Inc. (NYSE:NEWR) enables users to collect, store, and analyze real time data through its cloud-based analytics platform. NEWR’s cloud-based architecture operates under the Software as a Service (SaaS) delivery model, enabling companies to monitor, manage, and operate their digital businesses.
  • 1Q20 sales miss and decreased revenue estimates cost investors over 36% as shares fell from $94.45 on August 1, 2019 to $59.78 on August 7, 2019. Since its tank in August, shares have rebounded slightly as the stock is currently trading for $65.51.
  • Share prices fell 8% after reporting of 2Q20, despite beating top and bottom line expectations and raising EPS guidance from $0.55-$0.63 to $0.60-$0.67 for FY20.
  • Effective October 1, 2019, Mike Christenson replaced Hilarie Koplow-McAdams as President and COO.
Key points:

NEWR tanked in August 2019 leading up to and following its reporting of 1Q20 results, in which NEWR missed quarterly sales estimates. Management attributed this miss to a soft EMEA, an underperforming United States, and an increasingly competitive environment. Additionally, NEWR lowered its revenue expectations and growth estimates. NEWR’s price dropped over 36% from $94.45 on August 1, 2019 to $59.78 on August 7, 2019.

NEWR reported 2Q20 earnings on November 5, 2019. YOY revenue growth was reported at 27%. The key operating metric, Annualized Dollar-Based Net Expansion Rate, was reported at 112%, down from 124% in the prior year. CFO Mark Sachleben stated that this decrease was in line with expectations and driven by lower upsell activity.

Comments by Founder and CEO Lew Cirne acknowledged difficulties faced in the first half of the year and provided positive outlook going forward. NEWR released its New Relic Logs, New Relic Traces, and New Relic Metrics capabilities to its platform at the FutureStack user conference in September 2019. Additionally, New Relic also added programmability to its New Relic One Platform. Management is excited about its recent enhancements of the New Relic One platform stating that the platform is now “open, connected, and programmable.”

Lew Cirne also added excitement regarding the addition of Mike Christenson as President and COO, stating that Christenson’s experience will help drive NEWR revenues and increase management’s capacity to focus on strategic product initiatives.

Key growth drivers for the second half of FY20 include: increasing application coverage, international market penetration, and platform expansion yielding additional paid offerings and platform capabilities. Management anticipates to meet its $1B annual revenue goal in FY23.

What has the stock done lately?

Upon announcement of 2Q20 earnings, NEWR opened down approximately 7% from $66.50 to $61.76, despite beating top and bottom line expectations and raising EPS guidance from $0.55-$0.63 to $0.60-$0.67 for FY20. NEWR has slightly rebounded and is currently trading for $65.51.

Past Year Performance:

NEWR is down 26% since reporting 2Q19 earnings in November 2018, despite continually beating consensus revenue and EPS estimates. The stock peaked in March 2019 at $108.84 and bottomed out at $55.46 in September 2019.

 

Source: FactSet

My Takeaway:
NEWR was added to the AIM Equity Fund in October 2017 with a price target of $70.41, representing a 27.87% upside. Over the holding period, the stock peaked in July 2018 at $111.96 but has since receded to its current price of $65.51 due to its tank in August 2019 and recent dip in November 2019. With recent developments in the New Relic One platform coupled with a change in management, I believe that New Relic will rebound from its tank in August has room to grow. For these reasons, it is recommended that the AIM Equity Fund hold its position in NEWR.



Source: FactSet

Tuesday, November 19, 2019

A Current AIM Small Cap Equity Holding: Ollie’s Bargain Outlet Holdings, Inc. (OLLI, $67.24): “Ollie’s Staying a Bargain”


Ollie’s Bargain Outlet Holdings, Inc. (OLLI, $67.24): “Ollie’s Staying a Bargain”
By: Jack Blum, AIM Student at Marquette University



Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

Ollie’s Bargain Outlet Holdings, Inc. (NYSE: OLLI) Ollie’s is a retain chain of general merchandise primarily offering closeout deals on brand name goods. They specialize in overstocks, package changes, irregulars, and refurbished goods. Their products include bed and bath items, houseware items, and electronics. They were founded in 1982 in Harrisburg, PA.

• Ollie’s shares have experience volatility in the past year due in the most part to missed sales and EPS in Q2 of 2019.

• Due to these miss fires, management lower FY19 sales guidance. The stock tumbled down 20-25% after these announcements.

• Ollie’s is in the midst of one of their largest expansion periods in their history. From 2014-2018 they have expanded their store base from 176 stores to 303 stores and entered seven new states. Net sales grew at 18.1%, while comparable stores only grew at 4.1%. These new stores and expansion into new states is expected to continue to drive growth.

• Management is confident that the missed targets were just a blip on the radar screen and Ollie’s will continue their stellar performance.

Key points: 

Ollie’s has had an extremely volatile year to say the least. In August, after receiving their second quarter earnings results management adjusted their guidance for net sales. They decreased the target from $1.430 billion to $1.419 billion. These adjustments directly resulted in the stock price tumbling by up to 25%.

Ollie’s has a strong track record to back themselves up on. In a little over two years the stock has doubled in price from around $32 a share in early 2017 to its current price of $67. This is due in large part to their increased store growth over the years, and their advantage in their purchases of retail space. Ollie’s relies heavily on their relationships with top name brands such as P&G, Kellogg’s, Hasbro, GE, and Johnson and Johnson. When these retailers are unable to sell-through their inventory, they turn to Ollie’s to buy up their products. This allows Ollie’s to then turn around and sell these items at up to 70% off factory store prices and back up their trademarked slogan of “Good Stuff Cheap.”

They have benefited largely from the purchase of their new retail space at low prices. They purchased 13 former Toys R Us locations, and this strategy will be one of the reasons how they will be able to continue their expansion while also still growing and meeting sales estimates. The ability for the company to expand beyond the eastern seaboard, is another reason for positivity as they have only expanded as far west as Texas.

What has the stock done lately?

 The stock has decreased in price since their miss in Q3 earnings. However, based on their store expansion and their market expansion there is no reason to believe that they will not continue on their track of growth that they have been on the past couple of years. The negative sentiment of the earnings miss, and the subsequent market reaction has caused the stock price to drop well below its true value.

Past Year Performance:

Over the past year (November 2018-2019), Ollie’s is down 27.73%. But I remain optimistic that the stock price will continue to grow back up towards $70-80 range, due to its business model and continued growth strategies.

Source: FactSet



My Takeaway:

Ollie’s has faced some negativity lately but overall the stock has been one of the main bright spots in consumer discretionary sector of the AIM portfolio. After being added in 2017 with a price target of $44.22, the stock has absolutely smashed expectations. Even though the stock has experienced some turbulence in the past couple months I do not think that this is indicative for the future of the company. My recommendation is that we let this winner recover and show that they still are the solid company that we said they were.


Source: FactSet


A Current AIM Small Cap Equity Holding: Boot Barn Holdings Inc (BOOT, $40.24): “These BOOTs Were Made for Buying”


Boot Barn Holdings Inc (BOOT, $40.24): “These BOOTs Were Made for Buying”


By: Ellie O’Donoghue, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

Boot Barn Holdings (NYSE:BOOT) is an American retail company that sells western and work-related footwear, apparel, and accessories through the brands Ariat, Wrangler, Lucchese Boots, Idyllwind, and Cinch. BOOT operates in 248 stores in 33 states, alongside an e-commerce channel.

• BOOT’s operating segments have a diversified sales mix, with footwear accounting for 52% of revenues, followed by apparel at 34%, and Hats, Accessories & Other at 14%.   

• Management has indicated that sustained positive performance is due to broad-based strength across all segments, strong full-price selling, a sharp increase in exclusive brand penetration, and the continuation of increased store openings.

• Management has indicated a focus on delivering innovative digital experiences in the store and a seamless e-commerce experience, which will continue to accelerate top-line growth.

• BOOT could be heading to new 52-week highs with the recent earnings update’s guidance outlook for fiscal 2020, showing increases in same-store sales to 6.5% and earnings per share to $1.75.

Key points:

With management’s focus on continuing BOOT’s profitable growth, four strategic initiatives have been the drivers in BOOT’s strong performance this past year. In the recent earnings report, management provided updates on their initiatives of driving same-store sales growth, strengthening omni-channel leadership, exclusive brands, and expanding BOOT’s store base. Same-store sales saw a 7.0% top line growth, creating a solid ground for continuing the trend of currently a 10-consecutive quarter period of positive store comps.

Alongside top-line growth, BOOT has made major moves in the western and country market in order to capitalize on growing trends as well as diversify to retain and grow their customer base. With the launch of Idyllwind, a brand by popular Country Music Star Miranda Lambert, BOOT’s has continued to grow their exclusive private band portfolio driving in-store sales. In addition to adding more in-store experiences, BOOT’s has enhanced their store logistics by offering more floor space, upgraded POS systems in more than 100 legacy stores, and alternative pay options like Apple Pay. With new store capabilities, BOOT’s has been able to create more omni-channel transactions which has created seamless multi-media transactions, providing them the ability to remain on pace to add 25 new stores in the current fiscal year. With some doubts coming from investors about the sensitive tariff battles and BOOT’s suppliers, management touched on the issue saying any impact, if any, will be mitigated by their suppliers.

What has the stock done lately?

BOOT has increased 134.59% YTD and up 14.47% in the past quarter. Since reporting strong second quarter results on October 30th, the stock has continued to slowly, but surely, rise to hit its current price and 52 Week high of $40.24. Although a price range of $15.01-$40.24 shows some volatility, management’s clear vision and four-point strategic initiatives shows for a continued steady increase in stock performance.   

Past Year Performance:

Over the past year, BOOT’s Net Income has increased about 11% alongside hitting new highs for sales figures. EPS in the past year jumped to $1.05 comparable to the previous year of $0.53, with continued growth expected in the next fiscal year. With strength seen overall in valuation factors for the past year, I expect performance to continue to meet and exceed expectations.


Source: FactSet




My Takeaway

With a clear vision driven by already proven strategic initiatives and the lucrative holiday season arriving, I believe BOOT should remain in the AIM small-cap portfolio. Since being added to the portfolio in March 2018 at a price of $17.35, BOOT has proved itself to be a purchase, like a fine pair of western boots that only gets better with age. With a growing western and work wear market, BOOT is taking initiative by diversifying their product base and capitalizing on exclusive private labels in order to set themselves up for a long period of top-line growth. Through expanding and refining their media mix and their focus on current and new customer bases, BOOT deserves a solid YEE-HAW.
Source: FactSet


Friday, November 15, 2019

A Current AIM International Equity Holding: Canada Goose Holdings Inc (GOOS, $42.08): “Canada Goose on the loose” By: Molly O’Neill, AIM Student at Marquette University


Canada Goose Holdings Inc (GOOS, $42.08): “Canada Goose on the loose”
By: Molly O’Neill, AIM Student at Marquette University


Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

Canada Goose Holdings Inc. (NYSE:GOOS) is a market leader that operates in Canada, United Sates, Asia Pacific, and internationally. GOOS designs, manufactures, and sells premium outdoor apparel for men, women, and children.

• GOOS operates in two business segments: Wholesale which makes up 48.1% of sales and Direct-to-Consumer which makes up 51.9% of sales.

• GOOS is currently partnered up with Baffin Inc. GOOS offers Baffin footwear through their sales channel.

• Management has indicated that they plan to focus on product expansion of their fall, winter, and spring collections of outerwear and knitwear. Likewise, GOOS plans on creating their own line of shoes.

• GOOS’s stock price has dropped 28% over the past 12 months.

Key points:

Canada Goose Holdings Inc has been focused on expanding their DTC channel and has opened 11 retail stores in the past 3 years. They have expanding their Direct-to-Consumer segment into Canada, United Sates, United Kingdom, and China. For the first time in FY2019, Canada Goose generated more than half of their revenues from the Direct-to-Consumer channel.

Canada Goose has also focused on expanding their product across season and category. A majority of GOOS’s revenues are generated during the second and third fiscal quarters. This is due to the seasonal fluctuations, because Canada Goose primary focuses on producing outerwear. Canada Goose’s management team is focused on implementing growth strategies to close the gap on seasonal fluctuations. In FY2018, Canada Goose offered a knitwear collection creating a ~11% increase in sales in FY2019. Management has discussed their plan for producing a cold weather footwear, which has no timeline yet. The footwear has the opportunity to grow Canada Goose’s sales.

Management is highly focused on their strategic approach on inventory. Canada Goose disclosed that they manage their inventory differently, relative to other businesses. Management looks at finished goods for delivery and manufacturing. Their products are made to sell at full price and they never intend for the items to go on sale. On the manufacturing side, management looks at their projected order books to produce the inventory before future growth occurs. In turn, this causes the inventory to show up on the balance sheet earlier than other companies, affecting their quarterly sales.

What has the stock done lately?

Since Canada Goose reported their Q1 earnings on August 14th, Canada Goose's stock is up ~5%. Compared to FY2019 Q1, revenue has increased by 40.4% in Canada and 15.8% of revenue growth in the United States. Likewise, the revenues from both Europe and Asia market grew by 79.7%. The small expansion of product lines has clearly made a positive impact on Canada Goose creating a total revenue growth of 59.1%, compared to FY2019 Q1.

Past Year Performance:

Over the past 52 weeks, GOOS has had a price change of –26.55%. Last November, GOOS was at its high at $70.05. This past July, GOOS hit its 52-week low at $32.92. Following the dip in July 2019, GOOS has been fluctuating around $40.00.


Source: FactSet

My Takeaway:

GOOS’s management is working to overcome its recent growth struggles. Canada Goose continues to try and improve the problem they face with seasonality, by expanding their product lines. Likewise, with their expansion of the Direct-to-Consumer channel. With an emphasis on inventory strategies and strong growth of revenues Canada Goose has positioned themselves as a strong competitor. I believe once the margins start to improve, GOOS will have the ability to generate stronger returns. Even though the stock has not been performing its best, I rate GOOS at a hold, with the potential of future growth and revenue.

Source: FactSet


A Current AIM Small Cap Equity Holding: Natera Inc (NTRA, $37.22): “And Now We Wait” By: Nick Shotkoski, AIM Student at Marquette University


 Natera Inc (NTRA, $37.22): “And Now We Wait”
By: Nick Shotkoski, AIM Student at Marquette University


Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

Natera (NASDAQ:NTRA) is a medical diagnostic company specializing in the production and commercialization of prenatal genetic testing through minimally invasive products.

• The company has had a truly remarkable year delivering an impressive YTD return of 166.62%.

• The performance this year has been driven by the enormous potential of two new products, signatera and prospera.

• Signatera is a cancer detection technology that has shown the ability to detect a relapse up to 16.5 months faster and 8.7 months faster than current tools.

• Prospera, the other drug in their pipeline has the ability to predict the success or failure of a kidney transplant.

Key points:

When a stock is trading at a 9.3 price to sales multiple and a 28.0 Price to book multiple despite a net margin year to date of -47.11%, there better be some serious potential for the company to grow to ignore the sky high valuation and net losses. Luckily for investors of Natera, there are some major reasons to justify this valuation. Earlier this year, Natera announced the success of their drug signatera in detecting the recurrence of cancer in patients. Management has determined that this oncology minimal residual disease detection market represents a whopping $15 billion opportunity. Further more, a test done earlier this year demonstrated Signatera’s ability to detect cancer resurgence an average of 8.7 months faster and significantly more accurate than current methods. This ~9 month span is crucial in the successful treatment of cancer and can be the difference between life and death.

There are well over a million people in the United States today who are recovering from cancer and need to monitor the resurgence of the disease. Furthermore, there are over 100,000 new cases every year, representing a massive potential market for this drug which would be used multiple times a year. This is also just in the United States. Globally, there is even more opportunity for this drug to catch the resurgence of cancer faster than any other method currently available. The Chinese market alone is estimated to be 4 times the size and the company is currently working on rolling out the product in the country. While Signatera clearly has immense potential, it is not projected to be available for sale commercially until at least 2020.

But Natera’s success this year is not entirely based on the expectations for Signatera. The company has seen revenue growth of 18% in the 1st half of 2019 on their 2018 numbers. This is due to unit volume growth on their existing products of over 20%. This comes in addition to the strong prospects for Prospera, yet another product in Natera’s pipeline with immense potential. Prospera is a genetic test that is able to project whether a kidney transfer patient’s body will reject the kidney transplant or not. This represents a market of 180,000 people in the US with over 20,000 cases every year. This drug is set to be commercialized by the end of 2019. Clearly, there is an immense amount of potential for Natera and their offerings, but only time will tell if the company is able to live up to the enormous potential.

What has the stock done lately?

Simply put, Natera has killed it recently, achieving a 3 month return of 43.43% and a year to date performance of 166.92%. This significant outperformance has been caused by positive data regarding pipeline drugs Signatera and Prospera. The immense potential markets and early success of these drugs could not be ignored by investors and have driven this recent performance as well as a positive review of Signatera from Medicare draft coverage on August 22. Since this date, the stock price has risen steadily and hit an all time high of $40 a share.

Past Year Performance: 

AIG has increased 73.28% in value over the past year. Despite a rough 4th quarter of 2018, the triple digit growth in 2019 YTD has been more than enough to overcome the rough patch. It is worth noting that Natera trades at a significant premium of 9.29X LTM sales and 10.03X EV/Sales Multiple. Both are a significant premiums to their comps and industry.


1 Year Stock Chart vs. Benchmark
Source: Factset

My Takeaway:
Natera clearly has a ton of revenue growth and earnings growth potential from their pipeline products Signatera and Prospera. While they are trading near their all time highs of $40.92 and have already seen great performance this year, I think there is still room to run. Genetic testing is a rapidly growing market within healthcare with immense upside, and these two offerings are just a piece of the puzzle. It is now time for Natera to convert this potential into results. I believe the company and their management will be able to do this and create shareholder value for years to come.


1 Month Stock Chart
Source: Factset

Thursday, November 14, 2019

The Eleventh Set of Fall AIM Program Student Equity Pitches on Friday, November 15th - Join Us in Person or On-Line!

AIM Class of 2020 Student Equity Presentations 
Friday, November 15th


The eleventh set of fall AIM student equity presentations for the Class of 2020 will be on Friday, November 15th, 2019. 
   
Follow the link to access the student equity write-ups.  You can also find every write-up since AIM's inception in 2005 here.

November 15th Write Ups

Student
Company
Ticker
Fund/Sector
Sean Halverson
Trex Company Inc.
TREX
Industrials
Nathan Zirpolo  
Brink’s Company
BCO
Consumer Discretionary
Danny Smerz
National  Health Investors Inc.
NHI
Real Estate
Nicholas Goehring
Cabot Microelectronics Corp
CCMP
Materials

  • Location: Marquette University, College of Business Administration - Straz Hall, 1225 W. Wisconsin Avenue, Milwaukee 53233 - in Room 488 (AIM Room)
  • Presentation Times: 1:30 to 2:30 p.m. CST
  • Link to PDF Student Equity Write-ups

If you are unable to attend, you can always view them via YouTube HERE.


Saturday, November 9, 2019

A Current AIM International Equity Holding: Brookfield Infrastructure Partners L.P. (BIP, $50.17): “Proving that being aggressive in a value industry can pay off” By: Thomas Biegler, AIM Student at Marquette University


 Brookfield Infrastructure Partners L.P. (BIP, $50.17): “Proving that being aggressive in a value industry can pay off”
By: Thomas Biegler, AIM Student at Marquette University


Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

Brookfield Infrastructure Partners L.P. (BIP) is a global utilities company that owns and operates infrastructure assets throughout North and South America, Asia Pacific, and Europe in both developed and emerging markets. They were founded 2007 as a subsidiary of Brookfield Asset Management with a specialization in electric utilities and timber forestry and have since expanded their portfolio. BIP is legally held in Bermuda with headquarters in Toronto.

• BIP’s operating segments are well diversified, with transportation accounting for 34.7% of revenues, followed by utilities at 22.7%, energy at 14.4%, and data infrastructure at 3.7%.

 In the first half of 2019, BIP grew capital expenditures by $180 million to expand their impact in their utilities and transportation segments.

• Just this year, BIP has completed the acquisitions of a natural gas pipeline in India for $230 million, an Asia Pacific Data center business for a $50 million, and attained co-controlling interest in a Brazilian data center operation for $130 million.

• BIP saw an 11% CAGR between year ends 2014 and 2018, and with a strong and steady growth so far in 2019, this number can be expected to grow.

Key points: 

BIP was added to the AIM International Fund in November of 2017 at a price of $42.50 with a price target of $50.31. The investment thesis behind this purchase was that BIP would continue consistent growth, expansions, and disinvestments with positive returns. Since its purchase, BIP has done just that. They have managed to keep EBITDA margins over 50% during the last 5 years despite numerous acquisitions and investments into new markets. Additionally, they have placed more of an emphasis on midstream business investments with their recent acquisitions of Northriver, the largest independent natural gas gathering and processing operation in Canada, and Indian Natural Gas Transmission, a key player in India’s natural gas grid with over 1,480 km of cross-country gas pipelines. BIP is also placing an emphasis on exiting markets where they no longer see high potential for long-term growth. Just recently, they completed the sale of a 33% interest in a Chilean Toll Road for roughly $365 million, resulting in an after-tax IRR of 17%. Additionally, in the first half of 2019, BIP agreed to sell 40% interest in European bulk port operations for $130 million in proceeds.

BIP has also focused on keeping investments diverse geographically. In Brazil, where they see 23.9% of total revenue, there has been a negative YoY growth of -9.9% resulting in flat returns over the past year. Additionally, in Australia, which accounts for 23.7% of revenue, there has been a negative trend for three years which have resulted in operating losses. Fortunately, BIP has seen a YoY growth in revenue of 227.1% from Colombia which is responsible for 14.9% of total revenue and is their third largest exposure.

Heading forward, management wants to expand further into North America and capitalize on the nearly $150 billion of energy infrastructure opportunities available in the United States. In addition, they plan to fix their losses in Australia by seeking out more profitable investments, while also meeting growing demand in India and Mexico. Finally, based on the success of their midstream acquisitions, BIP aims to continue investing in midstream assets which provides further diversification and allows for greater long-term sustainability.

What has the stock done lately?

Over the last month, BIP’s shares saw a drop in price in the middle of November, bottoming out at $48.84, but has since seen steady growth, peaking at $50.33 towards the end of the month. Despite these small fluctuations, prices have seen steady increases over the last year and currently sits at a price of $50.17.


1 Month Stock Price Chart
Source: FactSet

Past Year Performance: 

As markets took a hit in late December of 2018, BIP’s share price dropped to $32.52 after seeing steady growth since 2016. Since then, BIP has been able to get back on track, seeing steady growth that has been accelerating since August of this year. Their current price of $50.17 represents a growth of over 54% since the hit in late 2018.

1 Year Price Chart vs. Benchmark
Source: FactSet
My Takeaway:

Since BIP was added to the AIM International Fund in November 2017, it nearly hit its price target and shows no signs of slowing down. Although their acquisitions disinvestments are numerous and may appear a little too aggressive, management clearly knows how to expand and exit markets strategically, all while maintaining growth. BIP has proven itself throughout its respective segments and is definitely a company to be excited about moving forward.