Choosing which stock you’d own if you could own only one is not a simple exercise.
It takes patience and discipline to even find candidates for such a stock; it takes even more to make a final decision about one.
Personally, I would not put all of my money into one stock. The world has plenty of options, and I think a portfolio with different assets in it works best for me. Although I don’t fully buy into the academic orthodoxy that maximum diversification is the ideal amount of diversification, I do think that some diversification is necessary for everyone except maybe high-ranking company insiders.
With that being said, I do know which stock I’d pick if I had to put all my money in just one. In this article, I’ll explore that stock and explain why it’s my #1 pick.
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Brookfield
Brookfield Corp (TSX:BN) is one of the most successful Canadian companies of all time. Although it’s not the largest Canadian company, it controls a network of funds and partially owned subsidiaries that, collectively, is likely the largest private entity in Canada.
Quality assets
One of the things that Brookfield has going for it is a high-quality collection of assets, combined with very little corporate-level debt. Some of its top holdings include:
- A real estate portfolio consisting of “trophy properties,” including Canary Wharf London, Brookfield Place New York, and ICD Brookfield Place Dubai.
- Brookfield Renewable Partners, a renewable energy company that is supplying power to Microsoft, Google, and the U.S. government.
- Brookfield Infrastructure Partners, an infrastructure developer working on some of the world’s biggest AI data centre projects.
These are some quality assets on the face of it. They are enough to get a person interested in Brookfield. They aren’t an investment thesis on their own, though. In the next section, I’ll explain why Brookfield is worth paying for to access all its prestigious assets.
Value
Brookfield Corp is famous for managing its debt well. The company’s debt is spread out across many companies and funds, such that, although the company owns hundreds of billions in assets, it has only about $11 billion in corporate-level debt. The rest of its debt is attributable to subsidiaries. For this reason, the company is immune to weakness in individual parts of its business.
The amount of equity left after you value BN’s assets at market value and subtract debt is less than the company’s current market cap. Also, the company’s stock trades at only 20 times distributable earnings (DE, an earnings metric that is specific to the asset management industry). These facts indicate that BN stock is a pretty good value today.
Foolish bottom line: Why don’t I have all my money in Brookfield stock
To conclude, I should address a question I anticipate receiving, which is:
“If you like Brookfield so much, why don’t you have all of your money in it?”
The answer is that I live in a world with many opportunities. Some stocks I’m aware of have more growth potential than Brookfield. Others trade at bargain basement valuations. Brookfield is a high-quality company, but it isn’t exactly #1 in every category. It’s for this reason that I prefer to have a modest amount of diversification in my portfolio.
