Saturday, January 6, 2018

Amazon Widening Moat With Prime, Alexa And Echo Integration

Sentiment rings true in Seeking Alpha article by Gary Bourgeault Amazon Widening Moat With Prime, Alexa And Echo Integration

Amazon (AMZN) thesis continues to be that the company is innovative and is well run and dominant in industry segments that have large market sizes including Retail (E-Commerce), IT Infrastructure and Services, Advertising, Entertainment. The company can grow in these markets with disruption and also seamlessly enter new adjacent markets over time and its innovation ability and competitive differentiation including Alexa, Prime and Logistics are key drivers.

Major threats to Amazon are Regulations and Government Interventions.

Mritik Capital Top Picks for 2018

Mritik Capital Top Picks for 2018 Include the following.

1. Brookfield Asset Management (BAM) Recommend Buy Under $42
2. Brookfield Property Partners LP (BPY) Recommend Buy Under $21.50
3. Brookfield Property Partners LP (BIP) Recommend Buy Under $42
4. Brookfield Renewable Partners LP (BEP) Recommend Buy Under $25
5. Brookfield |Business Partners LP (BBU) Recommend Buy Under $30
6. Berkshire Hatheway Inc (BRK-B) Recommend Buy Under $175]
7. Amazon Inc (AMZN) Recommend Buy Under $950]
8. Google Inc (GOOGL) Recommend Buy Under $930
9. Canadian National Railway Inc (CNI) Recommend Buy Under $72
10. Liberty Global Inc (LBTYA) Recommend Buy Under $30

To get the full list of 2018 picks and to subscribe to  subscribe by contacting Mritik Capital Equity Advisor Newsletter and Alerts

Brookfield Private Equity Business Starts 2018 with a Bang!

Brookfield Asset Management (BAM) to reach the $500B AUM target by 2022 needs to make great strides in Private Equity. Brookfield Business Partners LP (BBU) Starts 2018 with a Bang!

BBU announced two deals in first week of Jan 2018.

1. Brookfield to Buy Westinghouse Nuclear Business and Brookfield Goes Nuclear.
2. Brookfield to buy 75 pct stake in Schoeller Allibert for $310 mln

Mritik Capital Top Pick is up 100% from Jan 2016 to Jan 2018. Even at $38 per unit price BBU has potential to deliver huge upside if Graftech and North American Palladium investments can be exited at good valuation in the ongoing commodity upcycle.

Sunday, November 12, 2017

Brookfield Plans to Capitalize on Distress in US Retail Real Estate

Brookfield Asset Management (BAM) Plans to Capitalize on Distress in US Retail Real Estate by gaining control of GGP. BAM currently owns 35% of GGP through Brookfield Property Partners LP (BPY) and BAM CEO Bruce Flatt is the chairman of GGP.

The pessimism on US Retail stores and affect on US Mall Sector due to disruption from Amazon has driven down valuations to an attractive level with GGP shares hitting $19 per share (< $19B valuation for GGP).

This is a very attractive opportunity if BAM can buy the company for $22B to $25B or less total valuation. This will mean $15B to $16B that BAM/BPY and institutional partners (in managed funds of BAM) will pay for remaining 65% not owned by BPY. Overall BAM/BPY can put up $4B and control 51%  (35% + 1/4*65%) of GGP.

Then next step if they can acquire would be to close or sell off weak malls on non-prime locations and then for prime location class A malls convert excess space in parking lots into residential developments or office complexes of live-work-play. GGP has already done this in Ala Mona Mall in Hawaii and 95% flats have already been sold. They also just announced a deal in North Seattle to build apartments in their mall location with a partner. The well performing malls will keep operating for next 5-10 years and still earn cash flow which is $1.4+ per year per share so that is $1.4B. They can reduce apparel and add more services, entertainment and experiences clients.

The land underneath in many cases is very valuable and in downtown prime locations. Also all the Mortgage debt of GGP is non-recourse to parent company and each of the 125+ malls can default on their debt so if one or two malls fail in the long run the losses will be contained and debt holders get the key to that specific mall only.

Currently GGP and Retail (Including Rouse etc.) accounts for 1/3 of BPY cash flow. A sale of US office assets in North East US and purchase of GGP could boost the retail portion to 50% of BPY but at favorable valuations.

Saturday, October 14, 2017

Distress in Indian Telecom Spells Opportunity in Telecom Infrastructure

Distress in Indian Telecom sector caused by entry of Reliance Jio and the price wars spells Opportunity for investors in Telecom Infrastructure. Brookfield Asset Management, KKR, American Tower and others are eyeing the space with great interest. There is a potential for great returns to be made as data is the fastest growing commodity and India is the country to be due to demographics and projected economic growth.

Canadian National Railway - The Best North American Railroad

Canadian National Railway (CNI) is undoubtedly The Best North American Railroad. The railway network of 20,000 miles connects 3 coasts (Prince Rupert on Pacific, Halifax in Atlantic and New Orleans and Mobile in Gulf coast) to major North American markets including many major cities in Canada (Vancouver, Calygry, Edmonton, Toronto, Montreal, Halifax) and Central United States (Chicago, Detroit, Omaha, St. Louis, Memphis) and Southern United States (New Orleans, Mobile, Baton Rouge).

CNI has one of the best management teams and excellent focus on customer service, growth initiatives leading to top line growth and the industry leading Operation Ratio of less than 60%. CNI also has the best diversified business by business sector and geography. CNI has generated 14+% annual return since 1995 IPO. CNI returns nearly 85-90% of generated cash to shareholders with 30-35% as dividend and remaining 55-60% in the form of buybacks. CNI can grow earnings and dividend at 10% per year growing forward driven by 3% organic growth in revenue, 3% price increases and 3% growth due to buybacks.

Risk of Artificial Intelligence as a Disruptor

Artificial Intelligence (AI) as a disruptor is the biggest risk to many businesses over the next 10 years. Many industries including Retail, Media, Advertising, Banking, Transportation are already facing an uncertain future.

Amazon(AMZN)
Innovation and exceptional customer satisfaction by Amazon is upending the retail industry. Even entrenched companies like Walmart and Costco are having a tough time competing. AI based innovation with Alexa and Echo and Amazons expansion into food retail and brick and mortar with Whole Foods and expansion of fulfillment and Amazon Prime all enhance the wide moat around Amazon's business. AWS and Advertising are two additional pillars of growth and profitability for Amazon.

Alphabet (GOOGL)
Alphabet is investing in Artificial Intelligence through self driving cars and by leveraging AI into all aspects of Google including mail, search, virtual assistant etc. YouTube has a lot of potential for growth and Alphabet continues to be dominant in the advertising market with Facebook a distant second.