A blue-chip Canadian gem that has moved nearly 50% from peak to trough in recent weeks, Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) continues to rise on my list of value picks. Shares of the giant remain on discount relative to their fair value (or at least my calculation of what I believe the company’s assets are worth).
For unfamiliar investors, Brookfield is a consolidator of real assets, acting as a private equity firm would, traded on the Toronto Stock Exchange (TSX). This company recycles the cash its investments generate into buying new income-producing assets, growing both its underlying asset base, and cash flow, nicely over time.
This recycling of retained earnings into existing operations (acquisitions mainly) and a relatively solid balance sheet (even with the company’s real estate exposure) make this company attractive today for a couple of key reasons.
First, I think most investors are wrongly focused on the potentially declining value of the assets (book value) of Brookfield. I see this reality as a buying opportunity for Brookfield, due to the war chest of cash the company has amassed over the years.
Being able to buy a prized property or utilities business at a 50% discount is a huge tailwind, in my view, for Brookfield shareholders.
Second, it has become clear to me that we’re entering a lower for longer (and it looks like longer could mean a very long time). Therefore, the macroeconomic environment over the medium and long-term looks to be shaping up positively for Brookfield, to say the least.
Invest wisely, my friends.
