Do not be confused between Brookfield Corporation (TSX:BN) stock and Brookfield Asset Management stock. Brookfield, the parent company, was originally known as Brookfield Asset Management until it spun off its asset management business as Brookfield Asset Management in December 2022.
Specifically, it spun off 25% of the asset management business with the parent company still owning a substantial stake. After the spinoff, Brookfield stock continued to sell off through December 2022 and hit a low at the end of that month. This resulted in a rally of approximately 16% in the oversold stock in the subsequent month in January 2023.
Brookfield stock is a solid core holding
The growth stock has a track record of delivering market-beating returns for the long haul. Its 10-year annualized returns are approximately 18%, while its 20-year returns are about 16.5%. As far as the data I could access goes, the amazing stock delivered annualized returns over about 16.9% over the past 27 years. So, it has delivered double-digit returns of +16% consistently over a long time.
The global company operates in over 30 countries across five continents. It has extensive experience (over 100 years) in being owners and operators of businesses. It has over US$750 billion of assets under management. Its focus investment areas include real estate (primarily trophy office and quality retail properties), renewable power, infrastructure, private equity, credit, and insurance solutions.
What’s important is that the company is able to generate growing earnings through economic cycles via its inflation-linked cash flows from its operating businesses.
Because of its proven record in delivering strong returns on its investments over the long haul, it attracts institutional capital to its investment funds. Along with a robust balance sheet and global opportunities, it’s able to invest in the best risk-adjusted returns with ample liquidity.
Brookfield is a value investor
Another plus is that Brookfield is a value investor. Other than able to optimize its (acquired) businesses with its operational expertise, it also takes advantage of financial market opportunities. For example, during the pandemic, through Brookfield Infrastructure Partners, Brookfield acquired a meaningful stake in Inter Pipeline at dirt-cheap valuations. Later on, it ended up buying the company outright in October 2021. There are other instances where Brookfield would acquire cheap shares and later sell them at a higher price and profit that way.
Should you invest in Brookfield stock?
After rising 16% last month, which counts as a solid one-year return, Brookfield stock is unlikely to outperform this month. However, stock investing should be for the long term (because stock prices are highly unpredictable in the short term — say, over the next 12 months — let alone a month). In any case, the analyst consensus 12-month price target suggests the undervalued stock trades at a discount of about 23% at $49.22 per share.
The company has outright stated it aims for 12-15% long-term returns on its investments. So, if investors are able to buy Brookfield stock at discounts, they have a higher chance of pocketing even higher returns. So, the stock is a good buy now and an even better buy on dips.
Notably, Brookfield stock yields less than 0.8%. So, it should be viewed as a growth stock holding with which investors target price appreciation. In this sense, it could be a good consideration for the Tax-Free Savings Account.