Get Your Venture Capital Fix With These 2 Private Equity Companies

These companies help mitigate the risks of investing in smaller companies.

| More on:
The Motley Fool

Investing in smaller companies carries a certain amount of risk that more conservative investors are unwilling to bear, yet these types of companies are the ones that tend to offer higher returns if successful. So how about adding a middle man to mitigate the risk? That’s where these two companies come in. Think of them as a mutual-fund-style packaging of smaller up-and-coming companies all bundled together. This gives more conservative investors an option to add some alternative companies to their portfolio with a lower risk ratio.

Onex Corp

The first company I will be looking into today is Onex Corp (TSX: OCX), a private equity juggernaut with holdings including Allison Transmission, JELD-WEN, and Celestica. Onex invests in companies either through direct investment or through one of its four Onex Partner portfolios. Over its 30-year history, Onex has completed over 450 acquisitions worth $50 billion. In May, Onex completed $5.15 billion worth of funding to open its Onex Partners IV fund, of which $1.2 billion came from Onex.

Interesting days could be ahead for the company as the former chief of staff of the Office of the Prime Minister, Nigel Wright, has announced he will be returning to the company. Revenue in the past quarter came in at $6.5 billion, up from $6.3 billion in the same quarter last year, while net earnings came in at $99 million, a dramatic shift from last year’s quarterly loss of $271 million.

In terms of what the future holds for Onex, it has indicated that its targeted assets under management for 2017 has gone from $5 billion to $10 billion. The stock closed Thursday at $65.90, has a 52-week range of $47.16 to $68.43, and has an average price target of $67.90, with a high-end price of $70.

Brookfield Asset Management

Nipping at Onex’s heels is Brookfield Asset Management (TSX: BAM.A)(NYSE: BAM) a well-rounded company with a variety of assets. This century-old company has over $175 billion in assets in industries such as infrastructure, with 15,500 km of pipelines and 9,900 km of power transmission lines.

Its renewable power arm generates 6,000 megawatts of power at 217 generating facilities, while its property management division owns over 600 non-residential properties. Finally, its private equity division has $10 billion of capital deployed in companies such as Royal LePage, Ainsworth Lumber (TSX: ANS), Hudson’s Bay (TSX: HBC), and Vicwest (TSX: VIC). This type of portfolio balancing gives potential investors a plethora of industries combined in a single stock.

Brookfield posted revenue of $4.3 billion in its most recent quarter, down from $4.9 billion. However, while revenue fell, net income rose sharply to $843 million from $697 million during the same period last year. The stock closed Thursday at $46.43 and has a 52-week range of $35.35 to $48.79, just below its average price target of $43.60. Brookfield Asset Management currently offers an annual dividend of $0.69 with a yield of 1.4%.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Cameron Conway does not own any shares in the companies mentioned.

More on Investing

growing plant shoots on stacked coins
Dividend Stocks

TFSA Investors: 2 Dividend-Paying Mortgage Stocks to Boost Your Income in 2023

TFSA investors can allocate their new $6,500 contribution limits to two high-yield mortgage stocks to boost their tax-free incomes in…

Read more »

stock analysis
Investing

2 Safe Stocks I’m Buying Hand Over Fist Right Now

Although there is still a tonne of uncertainty about the economy heading into 2023, here are two safe stocks to…

Read more »

dogecoin is a speculative investment
Investing

Man’s Best Friend: A Retail Stock That Weathers Recession

Pet care could be recession resistant, so Pet Valu (TSX:PET) should be on your radar.

Read more »

oil and natural gas
Energy Stocks

Better Buy: Suncor Energy Stock or Canadian Natural Resources

Suncor and Canadian Natural Resources are generating strong profits. Is one undervalued?

Read more »

Arrowings ascending on a chalkboard
Dividend Stocks

3 TSX Stocks With Dividends That Outpace Inflation

Investors that worry about losing buying power due to inflation could put money into these three stocks! They’re known for…

Read more »

edit Businessman using calculator next to laptop
Dividend Stocks

Dividend Seekers: Which of These 3 TSX Energy Stocks Is a Better Buy?

Which is a better bet among TSX energy bigwigs?

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

3 Top Value Stocks to Buy in December 2022

Stocks such as Bank of Montreal and NFI Group are trading at attractive and cheap valuations in 2022.

Read more »

edit Person using calculator next to charts and graphs
Investing

4 Things to Know About Algonquin Stock in December 2022

Algonquin Power & Utilities (TSX:AQN) stock is down, but did you know these four key facts about it?

Read more »