Real Money Buy: I'm Adding to This Winner

It's ugly out there right now. With Europe on the verge of a major recession (or worse), and China's economy showing signs of weakness, there's a lot to worry about for equity investors -- and especially those with international exposure. In this type of market, I'm looking for high quality, capital-light businesses, with solid balance sheets, being run by talented management teams. Jones Lang Lasalle (NYSE: JLL  ) , one of my current holdings in the Total Realty Portfolio, looks like it checks off all of these boxes -- and it's reasonably priced to boot.

I first added Jones Lang Lasalle to the portfolio in December of last year, and the stock has rallied about 25% since then, but I think it still looks like a decent deal considering that the company is one part of a practical duopoly in the real estate services industry. The last few years have been a turbulent time for the real estate market, but Jones Lang Lasalle has capitalized on competitor's missteps to compile a track record of consistent market share growth. In the event of another downturn, Jones Lang Lasalle looks to well positioned to ride out the storm while employing its strong balance sheet to make opportunistic acquisitions.

Why I'm buying more
After reporting an outstanding first quarter, Jones Lang Lasalle followed with a ho-hum second, slightly missing estimates. The results looked even worse when compared to the results of its biggest competitor CB Richard Ellis (NYSE: CBG  ) , who easily bested analyst estimates. I've followed Jones Lang Lasalle for a few years now and it's rare for these two companies' results, or stock performance, to diverge significantly. Both companies' results are largely driven by the fundamentals of the commercial real estate industry. It's notable that even though both companies acknowledged that global real estate investors appeared a bit more cautious last quarter, Jones Lang Lasalle's management left their full-year estimates of investment volume intact at $400 billion. The one notable soft spot was global leasing volume, which the company now expects to decline 10% compared to last year.

There's no doubt that that we're in an uncertain market, but I think that Jones Lang Lasalle is well positioned to capitalize on market volatility and continue to win market share. Jones Lang Lasalle has a strong balance sheet that will allow it to continue making opportunistic acquisitions, an experienced management team who's navigated rough waters before, and a flexible business model that allows it to quickly shift assets and "right size" its business to match market demand in different geographies. These are all qualities that I think makes Jones Lang Lasalle a high-quality business and solid long-term holding.

Foolish bottom line
Peter Lynch once wrote, "The best stock to buy may be the one you already own." After scouring the market for real estate-related stocks that looked to be good investments, I found that I kept coming back to one of the companies that I know best. It's difficult to say how the commercial real estate market will respond if global markets turn sour, but it's good to know that Jones Lang Lasalle's management team has been through it before -- and recently at that. For investors looking to profit from the long-term recovery of the commercial real estate industry, it's hard to find a better company to invest in than Jones Lang Lasalle.

You can follow Jeremy on Twitter at @TMFTotalRealty

Jeremy is an analyst for Motley Fool Hidden Gems, a premium small-cap investing service. The Motley Fool owns shares of Jones Lang Lasalle. Motley Fool newsletter services have recommended buying shares of Jones Lang Lasalle. The Motley Fool has a disclosure policy.


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