Buying Some Gafisa on a Share Offering

I was wondering why Gafisa (GFA) was only one of a few of my small or mid-cap international stocks on my watch lists that was down; apparently there is a share offering, but I didn't see that until after I purchased some shares. I picked some additional shares up in the $17.40s as my pure play international exposure is lacking - this brings the stock up to a 1.5% stake.

Based on offering size - at a $2.3B market cap, a $300M offering would be 13% dilution so being down 6-7% isn't half bad.

• Gafisa said it expects that the aggregate size of the offering will be between 600 million Brazilian reals (about $308 million) and 700 million reals.

Gafisa S.A., together with its subsidiaries, operates as a homebuilder in Brazil.

[Mar 30, 2009: Restarting Gafisa as Sam Zell Increases Stake]

[Oct 22, 2008: Sam Zell Increases Stake to Gafisa to 18.7%]

[Aug 17, 2008: Gafisa Earnings]

[Nov 19, 2007: Initiated a Position in Gafisa - Brazilian Homebuilder]

Speaking of foreign stocks... I sold almost all my HDFC Bank (HDB) post the Indian results (on the huge gap up) and people keep piling into it even at 30x forward earnings. I must live in a parallel universe called the fuddy duddy zone.

Momo trading is all the rage it appears - buy high, a find greater fool, sell higher. Rinse. Wash. Repeat. I guess HAL9000 does not care about valuation - he just wants stock at any price. I continue to be amazed at the valuations I am seeing people pile into things across the board. Plus some of the junk people are piling in the sub $5 category... but until the music stops it works.

So many of these throwaway stocks that trade 50K, 100K shares a day now trading 2-4M on speculative juices. Buy what's up 15-20% today - sell it to next 'investor' tomorrow 15-20% higher. "Investing". Today's hot Chinese small cap theme? Sheep semen... it's hot. Plus there are 1.3 billion Chinese (obligatory throw away line to explain why you love anything Chinese) It's October 2007 all over again.

The company also produces and sells sheep breeding products, including frozen semen, embryos, breeder sheep, and Primalights III hybrid sheep

Long Gafisa in fund; no personal position

Comments

[RiskReturnO...:]

Smart moves. HDB is not worth the risk, as the post-Indian election rally is unjustified. Switch to TTM if you want India exposure.

GFA is interesting play on rising consumer living standard ... personally, I would use a pairs trade of long Gafisa (GFA), short Homex (HMX) ... this way, I'm protected in case of a big sell off in emerging markets ... with Latin America plays, it's alway good to be safe / hedged ... long Brazil / short Mexico is perhaps a good hedge against another Tequila Crisis in Mexico (things not looking good down south) .......

Jun 03 12:36 PM

[Stone Fox C...:]

Just added to GFA at 16. Incredible selloff providing a great buying opp.

Not so sure about the pairs trade. Guess it works for some people, but all you really do is introduce risk. Right concept, wrong market and you lose instead of winning. You also limit the downside. The key to emerging markets is to know when to exit which as we've learned in the 2000s applies just as much or more to the US market as well.

Jun 03 12:48 PM

[TraderMark:]

Yeh bought some more today at just over $16 myself

HopefullY GFA does not revisit $7... ridiculous price

HDB at 30x+ or GFA at 12ish for basically the same thesis.... just in different countries. But I'm sure the computers will sell them both equally on next panic. While Zell is not a newspaper guy I trust him on real estate related things.


On Jun 03 12:48 PM Stone Fox Capital wrote:

> Just added to GFA at 16. Incredible selloff providing a great buying
> opp.
>
> Not so sure about the pairs trade. Guess it works for some people,
> but all you really do is introduce risk. Right concept, wrong market
> and you lose instead of winning. You also limit the downside. The
> key to emerging markets is to know when to exit which as we've learned
> in the 2000s applies just as much or more to the US market as well.

Jun 03 03:27 PM

[Sober Realist:]

"Today's hot Chinese small cap theme? Sheep semen... it's hot. Plus there are 1.3 billion Chinese (obligatory throw away line to explain why you love anything Chinese) It's October 2007 all over again."
----wicked sarcasm. LOL

I'm keeping track of my reality check on China on my instablog.

Mark,
fascinating article here debunking China as a savior to the economic meltdown:
www.alterinter.org/art...

Jun 04 12:04 AM

[Lockstep In...:]

Hillarious post. China's credit splurge is easy to make fun of.

Jul 31 12:36 PM