What stock would you own if you had to hold just one for the rest of your life?
For most of us, that’s not the easiest question to answer, nor the most important. Diversification is a staple of modern portfolio management, and rightly so–the more you diversify, the less risk you take.
Nevertheless, asking yourself what stock you’d own if you could own just one is a great way to sharpen your analytical skills. In this article, I share the one stock I’d own if I could own only one.
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Brookfield
Brookfield Corp (TSX: BN) is the stock I’d own if I could own only one. A Canadian financial services company, it is involved in almost all financial sub-sectors. Since being taken over by CEO Bruce Flatt in 2002, Brookfield has vastly outperformed both U.S. and Canadian markets, compounding at about 16% annualized. The company aims to continue delivering similar returns going forward.
A big acquisition
This week, Brookfield made headlines when it announced it had finished acquiring Oaktree, a distressed credit firm it had been building a position in since 2018. Prior to the announcement, Brookfield owned about 62% of Oaktree. The full acquisition will give Brookfield the ability to control Oaktree’s operational decisions, a privilege that Brookfield waived as part of its earlier, partially owned investment.
Thanks to the recent Oaktree acquisition, Brookfield now owns the world’s largest and most prestigious credit firm. That will certainly improve Brookfield’s own prestige and ability to get in on Wall Street’s most exclusive deals.
Deals aplenty
Speaking of deals, Brookfield has been doing a lot of them lately. This past July, Brookfield Renewable Partners (TSX: BEP.UN)(TSX: BEPC) announced that it had inked a deal to supply $3 billion worth of power to Alphabet. A year prior, Brookfield Renewable inked a similar deal to supply 10 Gigawatts of renewable energy to Microsoft. Brookfield Corporation owns 48% of Brookfield Renewable Partners. So, these deals will will add value to Brookfield itself, not just its partners.
Performance
Over the years, Brookfield has performed quite well in the markets, compounding at a rate of about 16% per year. The company itself has been growing as well, with distributable earnings (DE) up 13% in the most recent reporting period. The company is quite profitable using DE as the metric, with a 7% DE margin in the most recent quarter.
Valuation
Brookfield Corp is a cheap stock by some metrics, trading at 1.35 times sales and 15 times distributable earnings. In the past, the stock traded at a large discount to its net asset value (i.e. equity but calculated with market values instead of book values). Due to Brookfield’s ongoing rally, which has seen it rise over 100% from the 2023 lows, that discount is not as large as it once was. Nevertheless, BN stock still trades a little below the market value of its assets, net of debt.
Foolish takeaway
Brookfield Corp is growing, profitable, and well run. Despite this, it is still cheap by some metrics. Trading at a discount to its net asset value, Brookfield looks like a bargain. For this reason, it is the stock I’d own if I could own only one.
