Despite the impacts from COVID-19, Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) remains resilient. Year-to-date, the growth stock is down about 11%. From its 52-week — an all-time high — it’s pulled back about 25%. Regardless of the sell-off, its long-term returns of 16.8% since 2010 are still very impressive.
The dip is an excellent opportunity to accumulate the growth stock for long-term investment.
As interest rates are at historic lows, retail and institutional investors alike seek greater returns elsewhere. More and more investors will gravitate toward real assets that offer attractive returns. BAM even made the bold estimate that investors could allocate 60% or more of their investments in alternative assets by 2030.
Brookfield Asset Management is a top choice for these investors. It is a value investor, owner, and operator of real assets and is set to experience secular growth for years to come.
BAM is more than a five-in-one growth stock
BAM already had investment arms in real estate, renewable power, infrastructure, and private equity. Last year, it acquired 62% of Oaktree and partnered with the company, which complements BAM’s offerings with its specialization in credit products, including distressed debt. There’s bound to be an elevated level of distressed debt in today’s stressful economic environment.
Through the Oaktree partnership, not only did BAM gain invaluable client relationships, but it also expanded its scale and became much more profitable.
Thanks largely to Oaktree, BAM’s number of private fund client relationships jumped three times to 2,000. Its fee-bearing capital also jumped 76%, leading to fee-related earnings growth of 44%, annualized fees and target carry increasing by 79%, and cash available for distribution or re-investment climbing by 22%.
BAM’s diversified portfolio of real assets are solid and resilient, allowing the company to grow through all parts of an economic cycle. In fact, I’d argue that stressful economic environments allow it to grow even more due to its value investing nature and its ability to raise capital.
For example, in the recent 12 months that ended in Q1, BAM raised US$45 billion across its business. It also found quality global investments to deploy US$40 billion. In the same period, it made strategic asset sales to realize proceeds of US$12 billion.
When investing in BAM, investors are not just investing in its portfolio of alternative assets, but also its extraordinary management team!
The global economy is experiencing contraction due to COVID-19 disruptions. This should benefit BAM, which has a capital recycling program and ample liquidity to take advantage of quality assets that are selling at valuations that are much lower than their intrinsic values.
The Foolish takeaway
Most of BAM’s investment arms aim for long-term returns of 12-15% per year. However, BAM is a value investor that’s also an expert in operating its assets. Therefore, by buying the stock on big pullbacks, such as this one, investors should generate even greater returns in the long haul.
Currently, analysts have an average 12-month price target of US$39.90 on the growth stock. This represents a discount of about 18% or near-term upside potential of approximately 22%.
The stock also tends to increase its dividend. BAM is a Dividend Aristocrat that has increased its dividend for eight consecutive years with a five-year growth rate of 7.6% in the U.S. currency. It currently yields 1.5%.
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Fool contributor Kay Ng owns shares of Brookfield Asset Management. The Motley Fool owns shares of and recommends Brookfield Asset Management. The Motley Fool recommends BROOKFIELD ASSET MANAGEMENT INC. CL.A LV.