Investors looking to invest $1,000 in a financial services stock with solid growth potential and reliable returns could consider Brookfield Asset Management (TSX:BAM). It’s one of the top alternative asset managers globally, handling an impressive $1 trillion in assets across industries like renewable energy, infrastructure, private equity, real estate, and credit.
Brookfield’s early investments into booming sectors such as renewable energy, nuclear power, and artificial intelligence (AI) infrastructure are starting to pay off. These industries are set for long-term growth, giving Brookfield plenty of room for growth.
Let’s delve deeper to understand why Brookfield Asset Management is a solid stock to buy right now.
A resilient business model with predictable returns
Brookfield employs an asset-light model, focusing on high-quality investments and distributing a significant portion of its earnings to shareholders. Its distributable earnings are primarily derived from fee-related income, which is stable and predictable, ensuring regular payouts and long-term shareholder value.
In its third quarter, Brookfield delivered record results. Fee-bearing capital surged to $539 billion—up nearly 23% year over year—driven by substantial inflows, strategic acquisitions, and portfolio growth. The company’s fee-related earnings reached $644 million, a 14% year-over-year increase, while distributable earnings grew 9% to $619 million.
Brookfield’s operating leverage also enabled it to expand margins to 58%, a substantial improvement compared to earlier quarters. With favourable market conditions, the company will likely witness continued earnings growth in the quarters ahead.
Multiple growth catalysts
Brookfield is well-positioned to thrive in industries experiencing long-term growth cycles. Its investments in renewable energy, data centres, and AI infrastructure provide a unique edge in capitalizing on multi-decade investment trends.
The company is also ramping up its credit business, recently consolidating all its credit operations under the new Brookfield Credit division. This segment now represents $245 billion in fee-bearing capital, with ambitious plans to grow to $600 billion within five years.
Doubling business size in five years
Brookfield has set its sights on doubling its business size within five years, targeting $1 trillion in fee-bearing capital. This expansion is expected to drive over 15% annual growth in earnings and dividends, fueled by the scaling of flagship funds, complementary strategies, and an enhanced credit platform.
As the company’s capital base grows and margins expand, Brookfield expects fee-related earnings to reach $5 billion annually. Moreover, its portfolio will become increasingly stable, with long-term and perpetual capital projected to account for over 90% of total assets within five years.
A constructive market environment
Brookfield will likely benefit from improved market conditions, including easing inflation, lower borrowing costs, and increased liquidity. These factors have bolstered transaction activity and asset monetization. In the last few months, Brookfield completed or signed deals for over $17 billion in asset sales and has a robust pipeline for further transactions.
The bottom line
Brookfield Asset Management is a well-diversified, high-growth company poised to deliver reliable dividends and capital appreciation. Its strategic investments in renewable energy, infrastructure, and AI give it a significant competitive edge, while its strong liquidity and ambitious growth plans ensure long-term value creation.
Overall, Brookfield Asset Management is a compelling choice for investors seeking exposure to high-growth financial services stocks.
