When building your own stock portfolio, it’s important to find companies that can thrive not just for a few years but for decades. Unfortunately, Canada does not have very many such companies.
But two stand out in particular: energy producer Canadian Natural Resources (TSX: CNQ) (NYSE: CNQ) and alternative asset manager Brookfield Asset Management
(TSX: BAM.A) (NYSE: BAM). Below we’ll take a look at three reasons you can hold either of their stocks for a long time.
1. Track record
If you’re a long-term investor, then you need to find companies that are proven performers. And both of these firms fit the bill.
In the 20-year period ending last year, Brookfield shares returned 19% per year to shareholders. Over a time period that long, you can’t attribute this kind of performance to luck. Rather, it’s been the result of smart investment decisions over time.
CNRL has also done incredibly well. Over the last 15 years, its shares have returned 17% per year. By comparison, Suncor shares have returned 13% over the same time period, with many other majors faring much worse. The key to CNRL’s success has been disciplined capital allocation and a tight grip on costs. These points of emphasis will not disappear anytime soon — great for any long-term shareholders.
2. Long-term outlook
Brookfield is in the business of buying hard assets such as property, infrastructure, and renewable energy projects. Much of what the company buys is from governments. And that will be a key going forward — so many governments around the world are facing budget issues, and selling assets is one of the best ways to raise cash. So Brookfield should have plenty of good buying opportunities for a long time.
Meanwhile, CNRL is well positioned to benefit from the continuing energy resurgence in North America. Transportation bottlenecks from Alberta are easing, and if any proposed pipelines get built, those bottlenecks should ease further. In the meantime, the growth of crude by rail should help the company get its product to market. Either way, there is a bright future for Canadian energy, despite the struggles in recent years.
3. The right mix
An investment in Brookfield comes with a nice bonus: instant diversification. The company has assets under management in North America, South America, Europe, the Middle East, India, China, and Australia/NZ. So that gives the company increased flexibility and the ability to deploy capital wherever the opportunities lie. It also decreases the risk of any one investment going bad.
Meanwhile, CNRL has a very balanced production mix, with a 40/30/30 split between heavy oil, natural gas, and light oil. The company is also transitioning to longer life assets, which means that capital expenditures can decrease in the future, increasing cash flow. The company may be more concentrated geographically than Brookfield, but that is probably for the best. Sometimes it’s better to be focused.
So with either of these companies, you get a proven performer, with the right mix of assets and a bright future. You can’t ask for much more.
