Gafisa is finally dealing...

I've been waiting for Gafisa, one of Brazil's most promising stocks, to use its excess cash (it's really Sam Zell's cash :-) to make some acquisitions. Well recently Gafisa made a move that will increase its exposure to Brazil's booming housing market (Brazil has a glut of around 7 million homes).

Gafisa SA, Brazil's second-largest real estate developer, agreed to buy a controlling stake in rival Construtora Tenda SA, aiming to boost its presence in the low- income housing market. The companies' shares surged.

As part of the transaction, Gafisa will have a 60 percent stake in Tenda, while Fit Residencial Empreendimentos Imobiliarios Ltda., the Gafisa subsidiary focused on low-income housing, will be part of Tenda, Sao Paulo-based Gafisa said in a statement on the Brazilian securities regulator's Web site.

According to analysts, both Gafisa and Tenda will enjoy synergies in the low-income market; I also see that UBS upgraded GFA upon hearing this news. I am also happy with Gafisa's surprise timing with this deal(even the experts weren't expecting M&A until 2009 or 2010).
I started a position in GFA today as it has pulled backed significantly since the Tenda deal. Nevertheless the chart is awful and I expect more pain ahead (hence the dollar cost averaging).

As an aside, it obvious that most of the BRIC/Commodity plays are getting slaughtered. Whether or not it's due to hedge fund redemptions or the impending global depression, all I can say is that you shouldn't invest in these names unless you have a 5-10 year time horizon, otherwise you will get scared out of them fast.

Position: Long Gafisa