Long-Term Investors: Avoid Making This Easy Mistake

Watchlists are a simple tool investors should utilize to watch top companies like Brookfield Asset Management Inc (TSX:BAM.A)(NYSE:BAM) and wait for a pull back in the stock.

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One of the most common mistakes an investor can make is buying a stock too quickly. Watch lists are a useful too that all investor should take advantage of to help you earn extra profit on your investments.

When you’ve identified a company that you like based on its core business and economics, you shouldn’t necessarily buy it right away, even if it’s at a fair price.

Watching it for a few weeks or months could make a huge difference long term.

Companies that are top quality, but perhaps aren’t fairly valued at all should also be added to the list, so when the price does inevitably come back down, you can buy the shares right away.

By waiting and watching stocks, investors will gain better insight into what news moves the stock and by how much, and also what its natural trading range is.

It’s one thing to look back at a historical chart, but it’s quite another to follow the stock for a period of time to find out more about its characteristics.

One stock that all long-term investors should at least have on their watch list is Brookfield Asset Management Inc (TSX:BAM.A)(NYSE:BAM).

Brookfield is one of the best-performing companies in Canada over the long term. It’s a high-quality capital allocator, it runs its businesses extremely well and its financial discipline is second to none.

Part of the reason why its track record is so stellar is the access to deal flow that it gets. Brookfield’s size gives it a huge competitive advantage, allowing it to source massive projects and assets world-wide.

Its efficient capital allocation and financial management allow it to have cash ready to invest when others need it, allowing it to invest at a reasonable price and then increase the efficiency of the operations to grow the potential earnings.

Its business model has been extremely successful the last decade with tonnes of net asset value created for shareholders as well as increasing its share price more than 100% in the last five years.

Its significantly large debt position is showing that it will most likely benefit from falling interest rates as its interest payments are reduced.

Brookfield also ended the most recent quarter with continued growth in its liquidity available, indicating that it’s building its investment position in advance of a downturn or chance to buy assets at a discount.

The flexibility and large scale allows Brookfield to thrive regardless of the economic conditions, which is why it’s one of the best stocks to own long term.

Its dividend currently yields 1.2%, but it’s continuously growing, with Brookfield raising it every year. The payout ratio on the dividend seems to stay consistently around 20%, so it’s clear the company keeps most of its earnings to reinvest into the business.

It trades at a premium today because it’s such a great company, but that shouldn’t deter investors from at least adding it to their watch lists, and when its stock takes a hit, if its business as usual for its operations, that will be the prime opportunity to take out a full position.

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. Brookfield Asset Management is a recommendation of Stock Advisor Canada.

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