Short-term traders sprint like hares, often hopping between speculative hunches and under-researched bandwagons. Fools, on the other hand, are content to sit on the tortoise's shell, armed with a mantra as relevant today as it is during bull markets: slow and steady wins the race.
In a market environment like this, tortoises are admittedly no less susceptible to short-term setbacks than their hippity-hoppity counterparts, and long-term investment specialist Brookfield Asset Management (NYSE: BAM) has not been immune to the turmoil. Seeking a balanced portfolio of infrastructure assets, including utilities, transportation, and timber operations, BAM spinoff Brookfield Infrastructure Partners (NYSE: BIP) is looking to win the race for stable income and capital appreciation.
Brookfield Infrastructure posted adjusted operating cash flow of $13.1 million for the third quarter, representing a 25% decrease from the prior year. Net income reversed course from a $5.3 million gain in 2007 to a $1.4 million loss for the latest quarter. Despite solid returns from the company's Chilean electric transmission lines, thanks to a retroactive rate hike and favorable currency exchange rates, the third quarter was broadsided by severe weakness from the timberlands segment.
Brookfield offered a decidedly negative outlook for the timber industry -- echoed by recent results from Weyerhaeuser (NYSE: WY) and Louisiana-Pacific (NYSE: LPX) -- and is adapting by conserving its inventory of secondary-growth Douglas fir until returns are more favorable. Meanwhile, BIP perceives an historic opportunity to acquire additional assets at distressed valuations, thanks to the panic of 2008.
BIP will divest a minority stake in non-core transmission line assets in Brazil for anticipated proceeds of $270 million. Combined with a sizable credit facility, the company now expects to have $600 million in its coffers with which to capitalize on the bargains available to grow its asset portfolio. For starters, Brookfield Infrastructure will invest $103 million to maintain a 30% interest in Longview Timber Holdings, as that company issues shares to purchase nearly 68,000 acres of timberland in Washington.
With a 7% dividend yield exceeding those of even REIT-structured timberland plays like Rayonier (NYSE: RYN) and Plum Creek Timber (NYSE: PCL), Brookfield Infrastructure is not without its rewards. With timberlands looking like a potential long-term drag on earnings, though, I would like to see Brookfield Infrastructure place greater emphasis upon acquiring transportation and utility assets before I re-affix my Foolish seal of approval.
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