Sunday, December 31, 2017

Preliminary Performance Report of the AIM International Equity Fund for 2017 – The Student Managed Fund Returned Nearly 23%

Marquette’s AIM International Equity Fund posted strong returns in 2017!

Marquette AIM students manage three funds. In a previous blog we reported on the oldest and largest portfolio - the AIM Small Cap Equity Fund. Both the AIM International Equity Fund and the Small Cap Fund had outstanding performance in the 2017 calendar year. 

The AIM International Equity Fund is more difficult to benchmark which is why two are reported below: the S&P ADR Index and the Russell Global xUS Index.

As the table below shows, the Marquette AIM International Equity Fund out-performed one the primary benchmarks for 2017. The 2-, 3-, and 5-year period returns lagged the benchmarks – which is in part to the performance of the US Dollar relative to international currencies.

(Click on any of the graphics to enlarge)

Additional risk-adjusted performance measures will be posted within the next week which will show strong risk-return performance for the fund over the past 10 years. The following charts are a quick snapshot of the Marquette AIM International Equity Fund as of 12/31/2017.

Preliminary Performance Report of the AIM Small Cap Fund for 2017 – The Student Managed Fund Exceeded the Benchmark by Over 10%

Marquette’s AIM Small Cap Equity Fund returned 24.9% in 2017!

Marquette AIM students manage three funds. The oldest and largest is the AIM Small Cap Equity Fund - which posted a preliminary total return of 24.91% for the 2017 calendar year. 

This represents a return of over 1000 basis points in excess of the primary benchmark – which is the Russell 2000 Index - which posted an impressive total return of 14.65% for the year.

As the table below shows, the Marquette AIM Small Cap Fund has now out-performed the primary benchmark for the past 1-, 2-, 3-, and 5-year periods.  The 10-year annualized return of 8.01% still trails the Russell 2000 Index.

(Click on any of the graphics to enlarge)

Additional risk-adjusted performance measures will be posted within the next week which will show strong risk-return performance for the fund over the past 10 years. The following charts are a quick snapshot of the Marquette AIM Small Cap Equity Fund as of 12/31/2017.

Monday, December 18, 2017

Forget Bitcoin - Here's the Marquette AIM Class of 2018 Stock Picks (as of 12/18/2017)

Top 20 Stocks Picks from the AIM Class of 2018

The AIM Class of 2018 has posted excellent stock returns over the past year. As a part of their final assignment of the semester, the students had to create a 10 stock portfolio and indicate their highest conviction stock pick. The follow list contains the top 20 stock picks (as of 12/18/2017) for the students in the AIM Class of 2018. We'll monitor this portfolio over the next semester versus the world stock index. Merry Christmas, Happy Holidays, and Happy New Year!

AIM Class of 2018 Stock Picks (as of 12/18/2017) Ticker Industry Sector Domicile
Albemarle Corp ALB Specialty Chemicals Basic Materials United States
American Woodmark Corp AMWD Home Furnishings & Fixtures Consumer Cyclical United States
Baidu Inc ADR BIDU Internet Content & Information Technology China
Bed Bath & Beyond Inc BBBY Specialty Retail Consumer Cyclical United States
Blackbaud Inc BLKB Software - Application Technology United States
BWX Technologies Inc BWXT Aerospace & Defense Industrials United States
China Lodging Group Ltd ADR HTHT Lodging Consumer Cyclical China
Chipotle Mexican Grill Inc Class A CMG Restaurants Consumer Cyclical United States
DBS Group Holdings Ltd ADR DBSDY Banks - Regional - Asia Financial Services Singapore
Gannett Co Inc GCI Publishing Consumer Cyclical United States
Healthcare Services Group Inc HCSG Business Services Industrials United States
Insulet Corp PODD Medical Instruments & Supplies Healthcare United States
Intercontinental Exchange Inc ICE Financial Exchanges Financial Services United States
KUKA AG ADR KUKAY Diversified Industrials Industrials Germany
Mastercard Inc A MA Credit Services Financial Services United States
Orbotech Ltd ORBK Scientific & Technical Instruments Technology Israel
Proto Labs Inc PRLB Tools & Accessories Industrials United States
Quidel Corp QDEL Diagnostics & Research Healthcare United States
Transportadora de Gas del Sur SA ADR TGS Utilities - Regulated Gas Utilities Argentina
Visteon Corp VC Auto Parts Consumer Cyclical United States

Click on the picture below for more detail.

A current AIM International Fund Holding: Astec, Inc. (ASTE) by Stephen Arcuri. "Cemented in Place"

                                 Astec, Inc. (ASTE, $53.75): “Cemented in Place”

By: Stephen Arcuri, 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.


Astec, Industries (NASDAQ: ASTE) is a global leader in the manufacturing of equipment and materials for asphalt road building, aggregate processing, oil, gas and water well drilling and wood processing, and other services. Astec offers over 220 products that help to service infrastructure and construction firms through three segments: the Infrastructure Group, the Aggregate & Mining Group, and the Energy Group. The company is headquartered in Chattanooga, Tennessee.

The Trump Administration’s failure to pass an infrastructure plan is directly correlated with Astec’s falling stock price. This looks more plausible post tax reform, but still remote.

America’s deteriorating infrastructure will provide a steady source of sales, but no near term catalyst.

Key points: The Trump Administration originally listed a trillion dollar infrastructure spending bill as one of their 100-day priority items. However, as the year has gone on and the legislative agenda has stalled and the incremental revenues that investors had priced in failed to materialize, Astec’s share price fell to a more realistic level. Confusion over what the plan will eventually look like makes pricing in any projects difficult. While Speaker Ryan proposed that for “every $1 of federal dollars, there [would be] $40 of private sector spending,” the President ruled out private-public partnerships.

Despite the lack of a national spending plan, American infrastructure is in need an upgrade; The American Society of Civil Engineers gave the United States a “D+”, or failing grade in 2017. This grade has remained little changed for the last 16 years, however, so there is little reason to believe that this report will have a meaningful change. While a real fix has yet to materialize, Astec is poised to continue to provide products to the firms working on these types of projects, and there is clearly enough work to be done.

What has the stock done lately?

Past Year Performance: Astec outperformed the Russell 2000 through most of 2016 as both presidential candidates discussed trillion dollar infrastructure plans that would have driven sales. Beginning in February, the realization that the spending would be a lower priority for the Administration caused prices to fall until they stabilized at their current price. A disappointing Q3 caused prices to fall almost 18% due to a disappointing quarter.

Source: FactSet

My Takeaway

Astec’s industry positioning gives them significant exposure to the kind of spending that would come out of an infrastructure plan. While tax reform will be a tailwind, it will not provide the same kind of price movement that sales growth would. Astec faces little downside risk and little upside without a bill to sign. It is worth review should the Administrations fiscal policies change in the coming months.

A current AIM International Fund Holding: IHS Markit (INFO) by Kevin Blank. "The Information Powerhouse"

IHS Markit (INFO, $45.13): “The Information Powerhouse”

By: Kevin Blank, AIM Student at Marquette University

Disclosure: The AIM International 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.


IHS Markit (NASDAQ:INFO) delivers information services to over 50,000+ customers in business, finance, and government. The company was created in July 2016 in all stock merger between IHS Inc. and Markit and has become a global leader in critical information, analytics, and solutions for major industries and markets.

• INFO’s business model creates a cycle of profitable growth and reinvestment capacity through a recurring sales model, profitable incremental growth, strong cash flow, and multi-billion share repurchase capacity.

• Merger cost synergies over $125M provide financial flexibility for targeted investments to realize further value from assets. Projected EBITDA margin expansion into mid-40%.

• In the financial services sector, regulatory landscape, changing investment behavior, changing market structure, and technology advancement are contributing to overall sector opportunity. IHS Markit can strengthen and expand information, processing, and solutions offerings.

• Recent announcement of acquisition of automotiveMastermind (aMM) in Q3, expanding automotive segment.

Key points: IHS Markit maintains ~83% recurring revenue that delivers strong and resilient growth. IHS Markit reaffirmed 2017 guidance for revenue trending above high end at ~$3,560 million (~4% organic revenue growth) and adjusted EPS trending at midpoint ~$2.05. IHS Markit introduced 2018 guidance revenue ranging from ~$3,770 - $3,830 million and adjusted EPS ~$2.17 - $2.23.

Merger synergies are allowing IHS Markit to manage dilution and drive higher adjusted EPS and free cash flow per share. Since the merger, INFO has been able to return capital through an attractive share buyback program. IHS Markit is committed to continue the program in 2018 and beyond. INFO’s balanced revenue offers 4-6% long term organic growth.

Regulations, such as MiFID II, drive further investment in best execution, compliance, risk management, market data and data management. INFO is a leading pricing and index provider. INFO also offers platforms for derivatives, FX, and loan trade processing. INFO’s processing investment is delivering more for customers such as increased functionality and workflow tools. Expansion opportunities exist in the quality and scope of data allowing for more complete regulatory solutions. The financial industry has a need to solve regulatory requirements and reduce costs. IHS Markit has the expertise, technology, and proprietary data that enables best-in-class data delivery and solutions. IHS Markit is also a leading platform for economic and country risk analysis. Providing a global perspective in over 200 countries, from over 400 data specialists, economists, country risk analysts, and consultants across various industries.

The acquisition of automotiveMastermind (aMM) complements and strengthens IHS Markit’s automotive franchise. The acquisition enhances ability to improve organic revenue growth. AutomotiveMastermind provides auto dealers in the U.S. with online tools, predictive analytics, and marketing services to help drive new sales. This will expand IHS Markit’s automotive sales and marketing business from the OEMs to the dealer market and expands overall addressable automotive market. IHS Markit purchased 78% of aMM for $392 million and the remaining 22% to be acquired over the next five years based on a valuation tied to underlying EBITDA performance.

What has the stock done lately?

Over the past month, INFO has risen ~5.65% compared to the Russell Global ex US 1-month total return of 0.51%. There has been a clear recovery of the stock price after falling September 26, 2017 after beating Q3 EPS estimates by 7.5% and revenue beating 1.5%. The EPS surprise was driven by an aggressive buyback of $324 million worth of shares during Q3.

Past Year Performance:INFO has increased 28.09% year-to-date, compared to the Russell Global ex US total return of 25.07% YTD. The 52-week range is $34.20 - $48.53.

Source: FactSet

My Takeaway

IHS Markit is a leader in offering information, processing, and solutions diversified across industries and customers. Revenue breakdown from financial services (~34%), transportation (~26%), resources (~25%), and consolidated markets and solutions (~15%). INFO’s high margins and recurring revenue model is strengthened by the need for efficient and reliable information solutions. I recommend that IHS Markit remain in the AIM International Equity portfolio.

Source: FactSet

A current AIM International Fund Holding: City Office REIT (CIO) by Mitchell Beine. "Stay Patient with this REIT"

City Office REIT, Inc. (CIO, $12.89): “Stay Patient with this REIT”

By: Mitchell Beine, 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.

  • ·        City Office REIT, Inc. (NYSE: CIO) is a real estate investment trust formed with the intent to acquire, own, and operate office properties primarily within the southern and western regions of the United States.  CIO has 18 employees and was founded in 2013 with its headquarters located in Vancouver, Canada.

  • ·       CIO operates in one industry segment through commercial real estate and 100% of the company’s revenues come from the properties located within the United States.

  • ·         City Office’s position in secondary markets will benefit the company moving forward, as this driver has not diminished in quality.

  • ·         One of the drivers behind this stock when it was pitched was it’s valuation, which has only grown more favorable with the slight drop in price.

  • ·         The stock has fallen just over 4% since it was pitched, and is down approximately 1.07% YTD.

Key Points: One of the main drivers behind CIO’s buy recommendation was it’s position in secondary markets and the growth opportunities this presents the company.  City Office REIT focuses on assets valued at $25-100 million with targeted cap rates, which are assets that large-scale REITs often pass over.  The company announced that it had completed a $33.3 million acquisition ("Papago Tech") in Phoenix, Arizona's highly desirable Tempe submarket as well as completed a $47.0 million property financing for a portion of the San Diego Portfolio that was acquired in Q2.  These acquisitions highlight the company’s ability to continue to find properties at a lower cost of capital than the CIO can earn back through rental income.  Despite a Q3 FFO miss by $0.02, the company reported revenue of $24.75M (+31.7% Y/Y).

The aforementioned acquisitions are evidence that City Office REIT will continue to expand its real estate portfolio to grow revenue.  This, along with positive business metrics such as same store cash NOI increasing 4.1% compared to the third quarter of 2016 and 7.3% compared to YTD 2016 show the company is growing its current properties in addition to its new ones.  If this continues to hold true, the valuation driver behind CIO when it was originally pitched will hold true as its rapid growth suggest it should trade at a higher multiple than the current P/FFO of 13.2.

Another positive for the stock is the risks that accompanied CIO when it was pitched have not come to fruition.  Rising interest rates negatively impact REITs, so it is a positive that rates have remained relatively stable since it was pitched and are not expected to dramatically rise in the near future.  Additionally, management did not announce any additional stock offerings following Q3.  The U.S. economy remains strong which will benefit City Office REIT as it continues to increase its occupancy rate with businesses.

What has the stock done lately?

CIO’s share price decreased by about 1.3% after reporting earnings on November 6th.  This reflects a slight disappointment as the companies FFO and revenue both missed slightly.  The stock has traded comfortably in the high $12s and low $13s since it was added to the AIM International Equity Fund.  It is clear that the market remains confident in management as the stock did not experience a more severe pullback following its earnings miss, and suggests that investors may be looking to reward the stock if it can manage an earnings beat in Q4.

Past Year Performance: After spending most of the year in the low $12s, City Office REIT briefly climbed into the high $13s in September, reaching a high for the year of $13.93.  Since this time, the stock has slowly sold off before finding a floor around $12.80.  The stock has not experienced any sharp swings of volatility in one direction or the other.  This combined with its large and consistent dividend make it a safe stock to own, while providing room for upside if the market places a higher valuation on the stock given its steady and substantial growth.

Source: FactSet

My Takeaway

City Office REIT was pitched to the AIM International Portfolio with a target price of $16.77 on October 6, 2017 with 22% upside.  Over the past few months, CIO has pulled back slightly from its purchase price of $13.44 and now resides at $12.89.  The market may be underestimating the growth in City Office REIT’s real estate portfolio, and the recent pullback may suggest that this stock may be facing an upward correction in the near future as its valuation cannot reasonably sink much lower.  As a result, I am recommending that the AIM International Portfolio hold City Office REIT as of 12/12/17.

Source: FactSet

Wednesday, December 13, 2017

A current AIM Program Small Cap Equity Holding:PGT Innovations, Inc. (PGTI) by: Jordan Luczaj. "Closing a Window"

PGT Innovations, Inc. (PGTI, $15.35): “Closing a Window”

By: Jordan Luczaj, 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.


·         PGT Innovations, Inc. (NYSE:PGTI) manufactures and sells both impact resistant and non-impact resistant windows and doors. They have three brands that they use to sell their impact resistant products: WinGuard, PremierVue, and PGT Architectural Systems. PGT has a vast product line and assembles products using both aluminum and vinyl frames.

·         On September 22nd, 2017, PGTI sold $28 million in assets to Cardinal Glass Industries. This was a strategic sale, given that PGTI also signed a seven year supply agreement with the same company shortly after. Cardinal Glass will continue supplying the glass components for doors at PGT’s current cost to produce. This allows PGT to pay down debt and focus more on their core business, which is window and door manufacturing.

·         Reconstruction and remodeling make up the other 60% of PGTI’s business. Considering that Florida represents around 90% of their market, the recent impact of Hurricane Irma is significant. Management does expect R&R to be up next quarter and possibly into next year based off of rises in demand due to damages and people’s desire to refortify their residences.

·         In the first half of 2018, PGT Innovations will be moving into a new facility in the Miami area. They are planning on increasing ad expense to possibly gain exposure here, as this is their first facility. Ideally, they want to capitalize on the strong labor market in Miami, and be closer to large customers in both Fort Lauderdale and Miami.

Key points: PGT Innovations has been a steady gainer, and stands to see a pop in sales due to the increased reconstruction efforts in much of Florida, especially the Gulf Coast. Their expanding market presence is moving them closer to Miami-Dade County, which controls a lot of the impact resistant glass/window regulations. PGTI sees large potential in the Florida market, and hope to hit 20% EBITDA margins within two years. This is a realistic goal, since they have attained 19% EBITDA margins, and will add depreciation upon buying the building in Miami and increasing equipment in the facility they retained after the sale to Cardinal Glass Industries.

Even though PGTI is focused on Florida, they have not been shy about making acquisitions and growing in other markets. In the past, they have made multiple acquisitions that have helped move them into Canada, where 2.5% of sales now come from. There best opportunity for growth prospects could be in interstate expansion, especially up the coasts and along the Gulf where states are affected by hurricanes and natural disasters. They also could see expansion in tornado alley where there is a need for impact resistant products. During this year, sales outside of Florida have grown between 25 and 30%.

Reconstruction efforts are going to be heavy over the next few years, which should boost sales above expected levels. PGTI will also continue their vertical integration to gain more control on lead times and manufacturing processes, which should increase margins. PGTI is built on a foundation of efficiency and market demand created by regulation and consumer demand for safety.

Their management team has been strong, but the CEO is stepping down after 2017. Even though he will continue to act as Chairman of the Board, this is not ideal given his knowledge of the industry, relationships with regulators and suppliers, and long-term planning ability.

What has the stock done lately?

On November 2nd, PGTI missed earnings and saw about a dollar dip in their share price. The miss was largely driven by lack of demand given the hurricane filled quarter. Management projected that there was a $13 million negative impact on sales due to Hurricane Irma and a few million dollar escalation in expenses related to complications. The stock did bounce back quickly after earnings, and is now trading near a 52 week high.

Past Year Performance:

Over the last 12 months, PGTI has been on the up and up, returning 37% during that period. Since PGTI was added to the AIM Small Cap Equity Fund on April 25th, it has returned 37.44%. There has been some volatility over the last year around earnings dates and a large increase in share price correlated with timing of the recent hurricanes.

Source: FactSet

My Takeaway:
PGTI has sped past its target price of $13.80 in a little less than seven months. The stock was a sound play given Florida’s housing demand and strong economy, high margins that are increasing with efficiency, and a more than competent management team. However, the stock has far exceeded my expectations mainly due to the effect that hurricanes had on a majority of PGTI’s market space. I imagine that sales will grow in 2018 above expected levels, but I wonder if PGTI is prepared for this uptick and how it will affect their margins and long term plan going forward. They will also be going through this during a major management transition. For these reasons, I am skeptical and recommended that PGTI be sold from the AIM Small Cap Equity Fund. There may be more potential left in this stock, but we are happy taking a 37.44% return given the opaque future and current valuation.

Source: FactSet

A current AIM International Fund Holding: Caesarstone Ltd. (CSTE) by Andrew Crossman. "Cut Caesarstone"

Caesarstone Ltd. (CSTE, $24.20): “Cut Caesarstone”

By: Andrew Crossman, 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.


Caesarstone Ltd. (NYSE:CSTE) manufactures and sells quartz surface slabs used for countertops and other interior surfaces, and they derive revenue from the United States, Austrailia, and Canada.

• The introduction of producing premium quartz products at Richmond Hill manufacturing site is a potential recovery driver, but is currently a drain on gross margin.

• Growth in sales revenue fails to pass through to bottom line due to raw material prices, negative weather impact, and operating inefficiencies.

• Increased competition drives Caesarstone’s production focus to the high-end quartz products.  

• Lower guidance for Q4 signals continued downward trends.

Key points: Caesarstone has been recovering from a 2015 price drop on the heels of missed earnings, lower guidance, and a report published by Spruce Point Capital Management accusing the company of selling low quality products at premium prices. Despite having a short position in the firm, subsequent management actions confirmed accusations.

In 2015, the firm opened a production facility in Richmond Hill, Georgia to produce higher quality quartz in response to investor worries. Currently, management attributes a decrease of 3% to Caesarstone’s gross margin as a result of increase production costs at this facility. Sales revenue growth has not covered increased costs, but is a potential driver of net income growth as operations improve in efficiency, increasing quantity and decreasing costs.

Sales growth has increased at a 5yr CAGR of 15.7%, but management has failed to maintain margins. In the latest earnings call, negative impact on gross margin were attributed to increases in the price of polyester (1.5%), losses from Hurricane Irma (0.5%), and changes in operations at their Israel production facility (3%). Management expects the price of polyester to decrease and losses from Hurricane Irma are expected to have short term effects on gross income. A shift to differentiate product output from the Israel increased production cycle and set up time, and could have a long-term effect on margin.

Caesarstone has faced increased competition in the medium quality countertop segment, which previously composed a high percentage of sales revenue. Management has cited increased competition as a driver behind the product shift to higher quality goods, stating that they will continue to compete on a lower level for medium quality market cap.

Guidance on EBITDA and sales were revised to the lower end of previous estimates, signaling little to no expected increases in operational efficiencies in Q4.

What has the stock done lately?

The stock has traded lower off of disappointing Q3 earnings results. Increased competition has been pointed to as a driver of margin compression and lower free cash flow. Active managers decreased position size in the stock of nearly 1M shares during the Q3, continuing a sell-off trend which has been present for the past year.

Past Year Performance: The stock is trading at a near 52-week low off of disappointing operating results as Caesarstone fails to break the operating structure that was previously in place. Investor confidence in management’s ability to overhaul has decreased shown through expectations for FY17 EBITDA at 19% lower than FY16. The stock is currently trading at a discount to P/E (ntm), EV/EBITDA, and P/sales historical averages.

Source: FactSet

My Takeaway

There could still be value in Caesarstone if management is able to successfully transition to serve higher end consumers at reasonable margins. Signals of a return to increasing EBITDA margins have been far and few between as management has shown the ability to grow sales, but has a poor track record for carrying those increases through to the bottom line. Exacerbated by decreased pricing power due to increased competition, Caesarstone’s share price will struggle to climb back up to levels of CY15. This position should be considered to be sold out of the AIM international equity portfolio.

Source: FactSet

A current AIM International Fund Holding: Iberdrola SA (IBDRY) by Thomas Dietz. "No More Wind in These Sails"

Iberdrola SA (IBDRY, $31.05): “No More Wind in These Sails”

By: Thomas Dietz, 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. 


Iberdrola SA (NYSE:IBDRY) is a globally diversified utility company headquartered in Spain, providing power and gas to over 31 million people worldwide.

IBDRY focuses primarily on wind and natural gas, with some nuclear and thermal plants still in use. IBDRY is the number one producer of wind energy in the world.

IBDRY is one of the largest utility companies on the planet, with most of the growth over its 70-year history coming from M&A activity.

IBDRY has a complex internal structure, with subsidiaries Scottish Power and Iberdrola USA operating semi-independently. 

Key points 

Iberdrola is a stable company that provides good global exposure and a healthy dividend, but valuations suggest that IBDRY is trading at or very near its intrinsic value.  Two of the main drivers that recently increased the stock price appear to now be priced into the stock.  UBS reported strong future cost cutting potential in their Scottish wind farms; they can accomplish this by implementing floating wind turbines that are less expensive to produce and can placed in further offshore in deeper waters where winds are stronger.  IBDRY stated that they will have an IPO for their Brazilian subsidiary’s assets to raise capital for increased infrastructure investment.  The market’s recognition of these catalysts leaves very little to spark new price movement.

Looking at the street’s top line and EPS projections reveals a company that is projected to grow 10% per year for the next three years and pay dividends at or above 4.5%.  Unfortunately, an average of the street’s forward EPS numbers times the forward P/E reveals a stock that sees little to no room for upside.  Furthermore, an analysis of their individual segments sees weak to no growth in their high margin UK and continental Europe businesses.  This puts additional strain to perform on their American segments.  This is worrisome because the US business sees tough profitability controls by the regulating bodies, and the Brazilian growth story is contingent upon the timely success of the IPO. 

What has the stock done lately? 

The past 6 months have seen no real direction, with the price oscillating between $30.50 and $33.  I take this as yet another indication that we are at or near the intrinsic value.

Past Year Performance: After a poor 2016, IBDRY started off the year quite well. IBDRY rocketed from a two year low of $23.75 to a five year high of $33.34.  Unfortunately, the back end of 2017 has been far less stellar, and $33 seems to be as high as the stock can climb.

1-Year Stock Chart vs. S&P ADR
Source: FactSet

My Takeaway 

IBDRY has run its course.  The stock lacks new drivers, and further problems in the European businesses could deflate the double-digit growth numbers that current valuations rely upon.  The current makeup of the international utility portfolio already has a strong South American presence between SBS and BIP, and BIP is more successful and profitable in European business lines.  I recommend replacement with an Asian utility, either in India or Southeast Asia. This will better serve for portfolio diversification and recognize the high growth opportunities to be found in India and Southeast Asia.