Brookfield Asset Management Inc (A) (BAM.A.TO)

(A Top Pick Jul 28/20, Up 35%) A juggernaut. Analysts have systematically underestimated how much money it will make from the carried interest of their managed partnerships. Brookfield estimated the value of its stock at 23% more than current market value in their last letter to investors. Biggest Canadian stock holding.

(A Top Pick May 01/20, Up 22%) They're privatizing their office holdings; they're contrarian value investors. Brookfield Property Partners shares were very depressed, give Covid and low vacancy rates but also problem pre-pandemic in their malls. They're offering a premium of 60-65 cents on the dollar which is good (https://www.globenewswire.com/news-release/2021/04/01/2203137/0/en/Brookfield-Asset-Management-Reaches-Agreement-with-Brookfield-Property-Partners-to-Acquire-100-of-BPY-Units.html). They saw an opportunity to buy an asset. He also likes their private equity, credit, renewable energy and infrastructure businesses.

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The company uses a lot of debt and so could be squeezed by higher interest rates. However, if the higher rates are accompanied by strong economic growth and inflation, the assets it holds will likely increase too. Insurance companies do well with higher rates. Unlock Premium - Try 5i Free

Should do well going forward in their 5 areas: property, infrastructure, credit, renewables, private equity. Will benefit as more institutions allocate funds to the types of alternative assets that BAM holds. Yield is 1.14%. (Analysts’ price target is $66.95)

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The CEO has said he thinks shares are undervalued by around 40%. The results look fine to 5i. Cash flow per share strongly outperformed estimates at $1.34 instead of 66 cents. It was the company’s best quarter ever with a dividend increase of 8%. Unlock Premium - Try 5i Free

He expects BAM to take it over and it's a good thing to keep BPY within Brookfield/BAM. The deal is accretive for BAM which he really likes. About BPY, you don't want to own these assets (offices, large retail) during this pandemic. Better to own apartments and industrials. BAM fell 5% on news of the takeover, but investors don't understand how accretive this deal is. BAM is a fantastic asset allocator; he wouldn't bet against them.

Their proposal to acquire BPY saw the stock sell off by 5%. However, this sell-off has seen the price go down to his buy price of 13.5x adjusted funds from operations, around $50. A phenomenal compounder for longterm investors. Creates value efficiently for shareholders. There is a lot of demand for the types of assets they own in this environment. (Analysts’ price target is $61.69)