2 Companies to Consistently Earn You 15% or More on Your Investment

Brookfield Asset Management Inc (TSX:BAM.A)(NYSE:BAM) and Fairfax Financial Holdings Ltd. (TSX:FFH) offer investors the opportunity to have some of their hard-earned money managed by two of the best money managers in Canada.

| More on:

As investors we can only buy shares in what’s available on the stock market, which severely reduces the number of opportunities for regular retail investors. However, we can still gain exposure to large projects and better deal flow by investing in large investment companies.

Financial and asset managers that provide quality returns are always a nice addition to the portfolio, because the returns usually far outpace the management fees, and if the asset managers have a different investment style to you, it will help to naturally diversify your portfolio.

Two fantastic companies investors should consider buying shares of are Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) and Fairfax Financial Holdings (TSX:FFH).

Brookfield

Brookfield is one of the best asset managers out there. It not only has a history of making great investments, but it has the size and expertise to take over operations of its investments. This allows Brookfield to have a plan when it decides to invest its capital, putting it in a much stronger position than being a silent investor.

The strategy has paid off for Brookfield, and investors have been rewarded. Looking back, the stock has three-, five-, and 10-year returns above 15%. On an annualized basis, the company has grown the dividend almost 90% since 2014 from $0.40 to $0.85 today.

It’s grown its equity from $53 billion in 2014 to over $97 billion in 2018, giving it a five-year return on equity above 10%. EBITDA margins have also been strong, consistently above 25%, and the company has been growing its EBITDA at a compounded annual growth rate (CAGR) of nearly 10% since 2014.

Another benefit that has to do with its size is the diversity of its subsidiaries. This makes Brookfield more of a capital allocator, allowing it to invest in one field when that industry or sector may currently be depressed. This just adds to the already exclusive deal flow and top-notch opportunities the company has.

Fairfax

Fairfax is run by one of the most famous investors in Canada, Prem Watsa. What is unique about Prem Watsa is that he’s considered by many to be the “Canadian Warren Buffett.” He started his company acquiring insurance companies directly modeled after Buffett’s company.

Another thing about Watsa most investors will be familiar with is his significant outperformance of the market back in the financial crisis. Watsa knew that there were global macroeconomic issues and took the steps to protect shareholders in a downturn. This ended up netting Fairfax a healthy profit, while many other companies were fighting for survival.

Watsa’s record isn’t perfect, but he has a lot of experience and is still one of the best money managers out there, so investors can count on him to manage their investment, especially for the long term.

This is great for investors, as you can count on Fairfax to protect your money during poor economic times, through shrewd investing from the top. Long-term investors will also be rewarded down the road when the investments Fairfax is making today pay off.

From 1985 till the end of 2018, Fairfax’s book value per share has grown at a CAGR of 18.7%, and the share price at a CAGR of 17.1% These numbers are incredible, and only Warren Buffett has consistent numbers like this for such a long period of time.

Bottom line

Both companies offer investors an impressive track record of investment performance. The diversification in assets and management styles coupled with the incredible past performance of both companies make them top investment candidates.

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 Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool owns shares of Brookfield Asset Management and BROOKFIELD ASSET MANAGEMENT INC. CL.A LV. Fairfax is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Confused person shrugging
Dividend Stocks

Passive Income: How Much Do You Need to Invest to Make $625 Per Month?

This retirement passive-income stock proves why investors need to always take into consideration not just dividends but returns as well.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Secure Your Future: 3 Safe Canadian Dividend Stocks to Anchor Your Portfolio Long Term

Here are three of the safest Canadian dividend stocks you can consider adding to your portfolio right now to secure…

Read more »

money goes up and down in balance
Dividend Stocks

Is Fiera Capital Stock a Buy for its 8.6% Dividend Yield?

Down almost 40% from all-time highs, Fiera Capital stock offers you a tasty dividend yield right now. Is the TSX…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How to Use Your TFSA to Double Your TFSA Contribution

If you're looking to double up that TFSA contribution, there is one dividend stock I would certainly look to in…

Read more »

woman looks at iPhone
Dividend Stocks

Retirees: Is TELUS Stock a Risky Buy?

TELUS stock has long been a strong dividend provider, but what should investors consider now after recent earnings?

Read more »

Concept of multiple streams of income
Dividend Stocks

Is goeasy Stock Still Worth Buying for Growth Potential?

goeasy offers a powerful combination of growth and dividend-based return potential, but it might be less promising for growth alone.

Read more »

A person looks at data on a screen
Dividend Stocks

How to Use Your TFSA to Earn $300 in Monthly Tax-Free Passive Income

If you want monthly passive income, look for a dividend stock that's going to have one solid long-term outlook like…

Read more »

View of high rise corporate buildings in the financial district of Toronto, Canada
Dividend Stocks

Passive Income Seekers: Invest $10,000 for $38 in Monthly Income

Want to get more monthly passive income? REITs are providing great value and attractive monthly distributions today.

Read more »