These 2 Stocks Are All-Stars in the Making

Brookfield (TSX:BN) and Brookfield Asset Management (TSX:BAM) stocks are all-stars on the rise.

| More on:
Hands holding trophy cup on sky background

Image source: Getty Images

Are you looking for stocks that are currently out-of-favour but could turn around to become “all stars” in the coming years?

If so, there are many opportunities for you to look into in today’s market. Technology stocks have gotten very expensive, but in just about every other sector, opportunities abound. Banks are down for the count. Oil stocks have moved only a little despite a very large move in oil prices. Foreign stocks, in general, remain much cheaper than North American stocks. The opportunities, alongside high yields, are out there if you know where to look. In this article, I will look at two out-of-favour stocks that could be all-stars in the making.


Brookfield Corp (TSX:BN) is a TSX stock that I recently bought after a prolonged period of being on the fence about it. I’ve known about Brookfield since 2018, and I’ve been reading about it this entire time, but it’s not until recently that I felt I understood it well enough to actually buy it. The fact that I was able to buy it on a significant dip certainly helped matters.

Brookfield is a tricky company to wrap your head around. It is a holding company. Beneath the corporate level, you have wholly owned real estate and insurance businesses, as well as a 75% stake in an asset management firm (more on that later). Another level down from that, you have ownership interests in various Brookfield “partnerships” and funds. There are dozens of Brookfield entities out there, and sometimes it’s hard to tell one from the other.

Basically, what you need to know is that Brookfield owns a real estate business and an insurance business, collects fees from its asset manager, and also has money invested in its own funds. It seems confusing at first but once you know that there are basically four “moving pieces” you need to keep track of, it gets a little easier.

Brookfield stock is very cheap right now, trading at 0.6 times sales, 12.6 times distributable earnings, and 1.1 times book value. The stock got beaten down for a number of reasons, including some real estate defaults and a large decline in first-quarter net income. However, the company’s cash flows and distributable earnings are still growing. There are risks here – the company is highly indebted in a time of rising interest rates – but there is real opportunity as well.

Brookfield Asset Management

Brookfield Asset Management (TSX:BAM) is Brookfield’s “asset manager,” mentioned in the previous section. It is a company that runs funds for clients and collects management fees. It’s an asset light business model that incurs almost no debt: BAM’s debt-to-equity ratio is a miniscule 0.05. The company’s margins are also sky high, with a 73% gross margin and a 53% net margin. “Gross margin” and “net margin” are different profitability metrics: both of these ratios for Brookfield Asset Management are among the highest you’ll find among listed Canadian companies. This suggests that the company is highly profitable. The downside is that BAM is much more expensive than its parent company, trading at 6.8 times sales. With that said, such a high-quality business probably deserves some kind of a premium. At any rate, I’m comfortable having a sizable percentage of my money invested in it.

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 Andrew Button has positions in Brookfield and Brookfield Asset Management. The Motley Fool recommends Brookfield, Brookfield Asset Management, and Brookfield Corporation. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Family relationship with bond and care
Dividend Stocks

TFSA Investors: 3 Cheap Canadian Stocks for Retirees

These three Canadian stocks are super cheap for retirees looking for a great buy that will last the test of…

Read more »

calculate and analyze stock
Dividend Stocks

CPP Disability Benefits: Here’s How Much You Could Get

Not everybody can get CPP disability benefits. If you want some passive income, consider investing in Royal Bank of Canada…

Read more »

growing plant shoots on stacked coins
Dividend Stocks

Boosting Your Monthly Income: TSX Stocks That Deliver

Dividend investing can boost regular or active incomes, especially select TSX stocks that pay monthly dividends.

Read more »

Canadian Dollars
Dividend Stocks

How to Earn $2,005 in Passive Income With No Start-Up Costs

Passive income doesn't need to be difficult work. In fact, by definition, it shouldn't be! Here's an easy way to…

Read more »

Dividend Stocks

TFSA Passive Income: How to Earn $4,800 Per Year Without the CRA Taking a Cut

A good strategy to generate tax-free income while reducing portfolio risk.

Read more »

edit Businessman using calculator next to laptop
Dividend Stocks

Ready to Invest With $5,000? 3 Stocks for December 2023

These top stocks are some of the most obvious choices out there for a reason. Pick them up if you're…

Read more »

Dividend Stocks

Should You Buy TC Energy for Passive Income?

TC Energy offers an attractive yield and a growing dividend. Is TRP stock now oversold?

Read more »

A plant grows from coins.
Dividend Stocks

2 TSX Dividend Stocks With Lucrative Yields in December 2023

BCE is one of the lucrative TSX dividend stocks generating strong cash flows, thus resulting in a steadily rising dividend.

Read more »