The Panic-Proof Portfolio (Stockchase Research) Brookfield Business Partners L.P. BBU-N TOP PICK Sep 19, 2024

BBU operates as a private equity company seeking assets that generate steady operating returns.  Since 2016, annual earnings growth has averaged over 35%.  It trades under book value and supports a 20% ROE.  We like that cash reserves are growing, while debt is aggressively retired.  We recommend setting a stop at $17, looking to achieve $26 -- upside potential of 26%.  Yield 1.2%

We reiterate this Canadian based private equity company as a TOP PICK.  Its investments are generally majority owned and internationally based, looking for capital returns in excess of 15% annually -- demonstrating the expertise of management.  We like that cash reserves are growing as debt is retired and shares bought back.  It trades at 17x earnings, under book value and supports a 20% ROE.  We continue to recommend a stop at $19, looking to achieve $28 -- upside potential of 27%.  Yield 1.1%

As analysts revise upwards their earnings outlooks, we reiterate BBU as a TOP PICK.  The company has realized over $6 billion in divestitures -- yielding a 30% IRR.  This is allowing cash reserves to grow, debt to be reduced and shares bought back.  It trades under book value and supports a 29% ROE.  We recommend trailing up the stop (from $19) to $21, looking to achieve $31 -- upside potential of 30%.  Yield 1.0% 

Our PAST TOP PICK with BBU has triggered its stop at $21.  To remain disciplined, we recommend covering the position at this time.  This will result in a net investment loss of 4%, when combined with our previous guidance.