I bought some a month ago as a long term investment, but have watched it go down almost every day since I purchased. Am I missing something here or should this be considered an even better opportunity?
BIP posted good FFO numbers but it also took a $275 million impairment on its natural gas distribution business. On the one hand, I think the market wants to see accounting profits in addition to FFO. If you buy economically depreciating assets, that has to count against whatever value in the FFO you create.
The firm is trading at a 5.4% distribution yield. I don't think it's a bad buy. I don't think the forestry and utilities businesses are going anywhere, but I do think the market is looking for an end to these writedowns, and the scrutiny has gotten tougher since some questions have arisen regarding BIP's accounting practices.
I want to be clear that there is a difference between depreciation and an impairment. An impairment is often done to reflect a decrease in the economic value of an asset. If you post $200 M in FFO but take a $300 M impairment, economically, you've lost $100 Million. Of course, you generally can't impair an asset below zero, especially if you're protected by limited liability, but will these impaired assets generate the same FFO? I think it's fair here for the market to take the impairment seriously.
One last point is that the market in general has been down for the past month. BIP has come down roughly in line with the market. Moreover, BIP has a lot of international exposure, especially to Latin America and indirectly to China through its Australian commodities assets. The BRICs have fallen about 10% since December, and BIP, as a more conservative utility with exposure to Chile, Brazil, and China, has fallen about 7%.
I think ~$36 is a fair price for BIP given the market and the impairment/accounting concerns. It might even be a good price to buy at, but I'm not sure. But I wouldn't get too down on yourself for the macro factors or writedown, assuming you've (correctly) put BIP in the international basket of your portfolio.