Agora Financial’s Rude Awakening

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Laguna Beach, California

• Sunrise for real estate investment opportunities…abroad,
• One cashed up company you won’t want to miss,
• When inflation is good, Saudi’s market opens up (a little) and more…

Joel Bowman, reporting from Dubai, UAE…

It is always happy hour somewhere. There is always a perfect sunset
somewhere. And there is always a bull market…somewhere.

Wouldn’t “somewhere” be a wonderful place to visit?

Unfortunately, this magical realm of raging markets and sublime sunsets is
nomadic. When opportunity turns to calamity in one economy, the reverse is
occurring in another.

Take the Middle East, for example. While the U.S. real estate market is
struggling under the weight of its own creative exuberance, the markets in
Dubai, Doha and Jeddah are roaring along. Investments in the regional
construction boom now top an incredible $2.4 trillion for projects either
underway or in development. Total cash being pumped into the civil
construction sector – residential buildings and tourism constructions etc. –
alone is just shy of the $1.4 trillion mark. That’s more than construction in
oil, gas, power, water and other petrochemical and industrial
sectors…COMBINED.

The 3 largest projects are:

• King Abdullah Economic City, Saudi: $120 billion
• Silk City Project, Kuwait: $86 billion
• Dubailand, UAE: $60

The mind-boggling amounts of money being poured into these non-oil related
developments represent a move away from oil-based economies and towards
asset-based ones. Of course, a good chunk of the money that funds these
massive developments derives from the investment arms of the petrodollar-
flush governments here, but even Saudi is starting to (slowly) move towards
the free (er) market model.

Next year, for example, it will be compulsory for all telecommunication and
petrochemical companies in the Kingdom to list on exchanges there, affording
citizens an opportunity to claim a stake in their nation’s mammoth reserves
(although I’m unsure as to what percentage they are required to list as
IPOs). Unfortunately, there are no plans as yet to open that market to
foreigners…or women.

Emaar, the Dubai-based property developer responsible for the palm island
constructions and the KAEC (above), will also be listing on both the DIFX and
in London in the new year.

But this is merely one slice of the global “opportunity pie.” In the column
below, Chris Mayer investigates one American company that is expanding its
operations beyond the U.S. borders and fattening its profit lines in the
process. This is a company you can buy and trade and, for the moment, it is
still pretty cheap.

Read on below for more…

—— Breaking Investment Alert ——

A Top Business Breakthrough Known Only by a Handful of Insiders Turns Out to Be One of the Best New Ways to Make a Bundle…

Plenty of people make tons of money every day in Real Estate and on Wall
Street. But if you’re looking for something different… and if you don’t have
$100,000 to invest or even $10,000…

Well, we’ve found it…

Till now, only a handful of insiders even knew about this almost secret
powerful business.

What is it? All I can tell you is that more than half of the world’s
billionaires have made their money this way. You’ll have to read on to learn
more about it.

Finally the cat’s out of the bag…Read On Here.

——————————————–

Landlord to the World
By Chris Mayer

“Buy bricks and mortar,” the billionaire real estate tycoon, Sam Zell
advises, “especially overseas bricks and mortar.” Investments in bricks and
mortar, says Zell, will provide more reliable investment returns than paper
assets.

If you accept Zell’s opinion, you’ll want to own Cohen & Steers (NYSE: CNS).
It’s the only publicly traded real estate asset manager out there that I know
of. Besides that, it’s just a fabulous business, available – for now – at a
good price.

The folks at CNS manage about $35 billion. Since 2001, the firm has been
growing this pile of assets by nearly 40% per year on average. It has a mix
of mutual funds and separate accounts that it manages for clients.

As with all asset managers, Cohen & Steers receives fee income, including a
cut on the market value of the assets it manages. Therefore, the company’s
sales have also grown at a 40% annual clip. The vast bulk of what it manages,
as you can see, is real estate related. (As an aside, it is expanding into
other areas, too, such as utilities).

Of that, the fastest-growing segment is in non-U.S. real estate assets.
Overseas real estate was only 30% of the total as recently as 2005. By year-
end 2006, it was up to 41%. By the third quarter of 2007, non-U.S. real
estate made up 54% of the total.

Right about here, a light bulb might’ve popped on over your head, like in
those cartoons. You have a big trend toward more publicly traded real estate,
particularly overseas. (See the Zell story above.) More publicly traded real
estate means more fees for Cohen & Steers, assuming it keeps its share of the
market. And Cohen & Steers is rapidly expanding its overseas real estate
assets.

That’s not even the best part.

Cohen & Steers is debt free and throws off lots of free cash flow. It enjoys
fat 40% profit margins and 26% net profit margins. The company will probably
generate about $100 million in free cash flow in 2008 with minimal capital
expenditures. You could buy the whole company for about $1.3 billion. That’s
a good price for a business of this quality.

The stock is about 35% off its high, as the market sold off anything real
estate related. The consensus on Cohen & Steers is that real estate values
ought to come down and with them, the fees Cohen & Steers earn. However,
there are a couple things that offset that risk.

First, there is the extraordinary growth of overseas real estate assets.
Second, about $11 billion of what it manages is in closed-end funds. These
closed-end funds are due for massive scheduled fee increases. The company
details these increases in its 10-K filing with the SEC.

So even if Cohen & Steers doesn’t grow assets at all – an event that seems
extremely unlikely – it has built-in fee increases that ought to push profits
along nicely.

Cohen & Steers has an excellent track record as far as I can tell. It seems
well ahead of the competition in this area. It reminds me of Brookfield Asset
Management (NYSE: BAM), another asset manager in a specialized field. (In
fact, the two track each other a bit if you lay the charts on top of each
other). BAM is the master of all things infrastructure. Cohen & Steers is the
master of all things real estate. It is well ahead of the competition
overseas.

This also speaks to another trend in money management these days. More and
more people look to hire specialists. Instead of hiring an asset manager to
buy a variety of things, people want a specialist who looks at one thing all
day long and masters that thing. To the extent the world continues to lean
that way, Cohen & Steers is in great shape.

I also like the fact that Martin Cohen and Robert Steers own more than 60% of
the stock. They are in there with you. They are motivated to create
shareholder wealth because they are the biggest shareholders. I suppose there
is the risk of self-dealing, but you take that risk everywhere. More so, I
would argue, when you are in bed with a management team that doesn’t own any
shares.

With the kind of cash flow Cohen & Steers generates, it could go private if
the shares get too cheap. In any event, the company is going to start to pile
up a lot of cash soon. Cash that can buy back stock or pay special dividends.
Cash that gives the company options.

I am excited about Cohen & Steers. It looks to have a bright future. It is a
unique opportunity. It has a growing $35 billion pile of assets that “sweat”
fees. Buy it and hang on for the long haul. It should be a rewarding
investment for years to come. In the short term, look for the stock to
challenge those old highs – a gain of nearly 50%.

[Joel’s Note: Faithful Rude readers will recognize Chris Mayer as the mind
behind the Capital & Crisis newsletter and Mayer’s Special Situations
research service. Both products offer first class investment analysis coupled
with Chris’ trademark nose for value.

But these two services are just two in a suite of exciting products included
in Agora’s premium lifetime package, the Agora Financial Reserve. The Reserve
covers everything from resource investing, options trading, small and micro-
cap research and international opportunities. That way, lifetime members can,
enjoy the fact that they never have to miss a raging market (or a sublime
sunset…or a happy hour) ever again.

To learn how you can become part of this elite circle of investors, read on
here: The Agora Financial Reserve.

Cheers,

Joel Bowman
Rude Awakening

P.S. We must note, however, that doors close for Reserve membership
applications on January 1, meaning you only have a couple of weeks to grab
your spot. After that, it’ll be another six months (and many investment
opportunities) later until you can apply. Our advice? Avoid the Christmas
rush and get in early. Here’s the link again. Agora Financial Reserve.