Better Buy: Brookfield Asset Management Stock or Fairfax Financial Stock?

These two asset managers remain strong choices on the TSX today, but which is better: BAM stock or FFH stock?

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Right now, investors are starting to get back on board when it comes to finance stocks. These companies tend not to do well during downturns, even with higher interest rates allowing them to bring in more cash. The issue is that these companies will see fewer loans come in with higher interest rates, and as costs rise, they’ll have more costs to deal with.

However, things are changing. Interest rates may indeed come down, as has inflation. So, now could be an excellent time to get in on some of the best finance stocks out there. This is why today, we’ll ask which is better: Brookfield Asset Management (TSX:BAM) or Fairfax Financial (TSX:FFH) stock?

BAM stock

During the company’s most recent earnings report, BAM stock reported some strong results investors can look to. The company reported strong fundraising, reaching $61 billion in capital at the time and well on track to raising $150 billion in 2023.

Now, the company achieved $26 billion in the most recent quarter when it came to raising capital. So, that leaves quite a lot to wonder where on earth the company is going to achieve the rest of that $150 billion in capital.

While 2023 looks strong, it seems some of the rest of the growth could be tied up in an Origin Energy offer. The company offered US$10.6 billion to take over the Australian power company. However, it has yet to be accepted, with just 69% of the required 75% shareholders of Origin agreeing to the takeover.

For now, BAM stock is looking at the future. The company wants to see where the government is headed in terms of its green energy initiatives. If it looks like this could speed up in the future, an investment in Origin wouldn’t be the right move. So, while BAM stock may offer up $150 billion in potential capital and a 3.37% dividend yield, it’s looking quite up in the air at the moment — even with shares up 32% year to date.

FFH stock

FFH stock is a hugely undervalued stock at this point. Property and casualty insurance continues to be an undervalued sector. And FFH stock is the top dog when it comes to this area of the market — especially as it has produced major growth over the last few years.

Shares of FFH stock are up 49% year to date, as of writing this article. Yet the company has seen shares come down 5% recently. This occurred after the company’s head decided to expand its stake in Orla Mining.

While some investors may not like it, the company believes it’s getting a great deal. What’s more, FFH could see even more growth from the company in, at the very least, the next year or so. Plus, it’s not as if the company doesn’t have the cash to spend. While BAM stock has missed earnings estimates, FFH stock seems to continue climbing past them.

During its most recent quarterly report, analysts touted the stock as an outperformer. The company delivered a strong quarter, seeing growth across the board from underwriting to investments. Market conditions, as mentioned, remain strong for property and casualty insurance, and this isn’t looking to slow down.

So, while shares may have come down after the Orla Mining expansion, the company remains a deal. It also continues to offer a strong 1.11% dividend yield, trading at just 7.18 times earnings! So, of the two, I would lean towards FFH stock on the TSX today.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Fairfax Financial. The Motley Fool recommends Brookfield Asset Management. The Motley Fool has a disclosure policy.

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