Gain Long-Term Growth With Brookfield Asset Management Inc.

Thanks to its wide variety of subsidiaries and a long history of strong investments, Brookfield Asset Management Inc. (TSX:BAM.A)(NYSE:BAM) is a great buy.

| More on:
The Motley Fool

Brookfield Asset Management Inc. (TSX:BAM.A)(NYSE:BAM), one of the world’s best value-investing firms, has made many investors a ridiculous amount of money if they stayed committed.

One of my favourite statistics about Brookfield Asset Management is that had you invested $10,000 in the company about 20 years ago, you’d be sitting on a portfolio worth about $320,000 today. With less than a $50,000 investment, you’d be a millionaire today thanks to the smart investments Brookfield Asset Management made.

A big reason it has been able to generate these sorts of returns is because it has focused on core projects, including real estate, infrastructure, power generation, along with a portfolio of private equity and other assets.

There are a couple of reasons that the company has been able to boost its income so strongly.

The first is its US$110 billion that is “fee-bearing capital.” This means that it holds investors’ funds, invests that money, and receives a fee for it. In 2016, it brought in US$712 million in fee-related earnings compared to US$496 million in 2015 — 44% growth. Since 2011, fee-bearing capital has grown from US$64 billion, an 11% CAGR.

The other reason that the company is able to boost its earnings is its listed entities. These are well-known names, including Brookfield Property Partners L.P.Brookfield Renewable Partners LP (TSX:BEP.UN)(NYSE:BEP), Brookfield Infrastructure Partners LP, and Brookfield Business Partners L.P.

These entities operate businesses that Brookfield spun off when it had accumulated a strong enough portfolio of assets in a specific area. What makes this particularly appealing is that they are focused on generating cash flow. Further, because of the parent/child relationship, Brookfield Asset Management is incentivized to invest alongside its spin-offs, allowing both firms to grow much stronger.

And it does this on a regular basis.

A big project was the announcement that Brookfield Asset Management was leading a consortium of investors alongside its renewable energy spin-off to acquire TerraForm Global and 51% of TerraForm Power. Brookfield Asset Management contributed US$787 million, and Brookfield Renewable added US$500 million. But rather than Brookfield Asset Management having to operate it directly, Brookfield Renewable will handle it, making the business far more likely to be a success.

Going forward, I anticipate this strategy to become even more important for the company. With billions of dollars in dry powder, the coming years should be full of press releases discussing the latest acquisition that Brookfield Asset Management has made either on its own or with one of its spin-offs.

Ultimately, my investment thesis on Brookfield Asset Management is straight forward: as an asset manager that allocates resources with the ultimate goal of experiencing outsized returns, there are few as good as Brookfield Asset Management. However, to double down on your investment, I believe owning the child companies are also worth considering.

Year after year, Brookfield Asset Management provides strong returns for investors. Compared to S&P/TSX Composite Index, it absolutely blows it out of the water. Over the past five years, an acquisition of Brookfield Asset Management would have returned over 128%, whereas the S&P would have only returned 31.6%. Consistently beating the market is something Brookfield Asset Management does exceptionally well.

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 Jacob Donnelly has no position in any stocks mentioned. The Motley Fool owns shares of BROOKFIELD ASSET MANAGEMENT INC. CL.A LV and BROOKFIELD BUSINESS PARTNERS LP. Brookfield Infrastructure Partners is a recommendation of Stock Advisor Canada. Brookfield Renewable Partners is a recommendation of Dividend Investor Canada.

More on Investing

Map of Canada showing connectivity
Dividend Stocks

Trump’s Tariffs: 1 Canadian Stock to Dump and 1 to Buy Immediately

As Trump threatens tariffs on Canada, these are two top stocks to watch.

Read more »

man touches brain to show a good idea
Stock Market

The Smartest TSX Stocks to Buy With $3,000 Right Now

Want some smart TSX stocks that you can safely hold through 2025 and beyond? These three stocks may be worth…

Read more »

bulb idea thinking
Tech Stocks

The Smartest Canadian Stock to Buy With $1,000 Right Now

Strong financials, booming demand for its services, and an expanding presence in AI and cloud computing hardware make Celestica the…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

TFSA: 4 Canadian Stocks to Buy Now and Hold Forever

These top Canadian stocks could give a big boost to your hard-earned TFSA savings in the long run.

Read more »

stock research, analyze data
Dividend Stocks

Prediction: These Could Be the Best-Performing Value Stocks Through 2030

Despite short-term challenges, these top Canadian value stocks could outperform the broader market by a wide margin in the coming…

Read more »

open vault at bank
Bank Stocks

What to Know About Canadian Bank Stocks for 2025

With interest rates expected to decline further, along with economic uncertainties and U.S.-Canada trade tensions, Canadian bank stocks could see…

Read more »

Paper Canadian currency of various denominations
Investing

Top Canadian Stocks to Buy With $5,000 in 2025

These top Canadian stocks are poised to deliver impressive gains led by significant demand and sector-specific tailwinds.

Read more »

An investor uses a tablet
Dividend Stocks

Where Will BCE Stock Be in 5 Years?

Despite facing big short-term challenges, BCE stock’s strong market position, steady dividend, and long-term vision make it worth watching.

Read more »