When a stock runs up by high percentages, your natural inclination is to think “time to sell.”
This is particularly the case when a stock roughly doubles in a short timeframe. In such a situation, you might be inclined to think, “Well, I’ve doubled my money, might as well lock in gains rather than see my stock go down again.”
Big mistake.
If a stock is of high quality, you’re often better off holding it long term – even if it’s up 94%.
If you look at stocks like Berkshire Hathaway, Costco and Google, they’ve been taking their investors up and up over the years. According to investing legend Charlie Munger, finding such stocks – not trading in and out of them – is the holy grail of investing. In this article, I will explore one Canadian stock that has risen 94% and probably still has further to run.
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Brookfield Corp
Brookfield Corp (TSX: BN) is one of Canada’s most distinguished financial services companies, operating in many sectors. A diversified conglomerate, it owns a world-class real estate portfolio, a fast-growing insurer, and the world’s biggest alternative asset manager. The company is extremely well run, with excellent debt management and a network of partners all over the world who ensure that it gets plenty of investor capital to invest and earn fees on. The stock has risen approximately 94% since December 1, 2023, and it still looks like a good value today.
A major vote of confidence
One major clue that Brookfield stock is a winner is the fact that it has so much backing from the world’s best investors. These investors have sung the company’s praises, and in many cases invested in it. They include:
- Howard Marks. He sold his company Oaktree to Brookfield, and now owns a large stake in Brookfield itself. He called the company very well run.
- Mohnish Pabrai. He owned Brookfield stock briefly, saying it had the “best asset management DNA” of any comparable company.
- Chuck Akre. A long-time Brookfield holder.
- Lou Simpson. The former manager of Berkshire Hathaway’s GEICO, he later became a Brookfield shareholder through a fund he controlled.
What Brookfield has going for it
What is it that these top investors see in Brookfield?
First, the company has an excellent reputation, which has led it to opportunities other asset managers could only dream about. It owns half of the nuclear firm Westinghouse; it owns some of the most prestigious office buildings in the world; its renewable subsidiary supplies billions of dollars worth of power to Microsoft and Alphabet. The list of distinguished assets this company owns could fill a book.
Valuation
Last but not least, Brookfield stock is comparatively cheap – at least by the standards of a growing compounder. The company trades at a mere 16 times distributable earnings, and is at a slight discount to its net asset value. Basically, when you buy BN stock, you are getting more underlying value than you are trading dollars for. On top of that, the company’s asset management subsidiary has tens of billions worth of committed capital still waiting to be invested, so its earnings will probably grow going forward. In light of this, the stock’s 94% run up is no problem at all.
