To be clear, there are a number of value traps on the market today that look too cheap to ignore. However, these are cheap for a reason and have the potential for significant near-term declines. I have had this view of Brookfield Property Partners (TSX: BPY.UN) in the past. In this article, I’m, going to discuss the value-oriented case for owning this stock in today’s uncertain environment.
On a valuation basis, Brookfield Property is cheap. From a fundamentals perspective, the picture gets murkier due to the subsidiary’s high level of debt, its exposure to office and retain assets, and questions about the sustainability of the company’s yield given its current payout ratio.
For those willing to bet on more stimulus and government rent support on the horizon, and a quicker pandemic recovery than expected, this could be a great value pick on this basis alone.
That said, the primary reason I’d recommend aggressive value investors check out this stock at these levels is the company’s parent company, Brookfield Asset Management (TSX: BAM.A) (NYSE:BAM).
As the company’s largest single shareholder, BAM has indicated it would increase its ownership in BPY to as much as 60% through a substantial issuer bid, with the potential to acquire the company outright should its shares drop too low in the near term. This floor that has been placed under BPY’s shares is bullish for value investors and indicates these assets could be a great value opportunity today.
Invest wisely, my friends.
