I’ve been generally bullish on Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) over the long term. That being said, the company’s fundamentals have now shifted to the point where Brookfield now looks like it could be a candidate for a short position on a long-short trade over the near term.
The fact that Brookfield holds a number of subsidiaries with a vast amount of diversification across multiple sectors and geographies is generally bullish long-term. That being said, at these current levels, it appears investors and the market are potentially overpricing this value. It’s bidding up shares of Brookfield to relatively high levels compared to the company’s historical trading range.
Shares of Brookfield now trade around 18 times EBITDA, a level which is too pricy for long-term value investors, in my view.
As such, I would recommend those looking to trade the short term volatility the market is providing to consider a long-short play in which Brookfield would take the short end of the trade and a real estate stock in the industrial and/or infrastructure space would take the long end.
This would capitalize on what I view as a market dislocation between industrial/infrastructure real estate assets and office/retail real estate assets which Brookfield Asset Management holds a significant portfolio of.
Thus, long Brookfield Infrastructure Partners (TSX:BIP.UN), short Brookfield Asset Management would provide investors with the ability to capitalize on market pricing and efficiencies in the REIT space.
Invest wisely, my friends.
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