A Different Kind of Buyout Firm by Michael Santoli
Summary: Canadian Investment firm Brookfield Asset Management (NYSE:BAM) focuses on real estate, hydro-electric plants ($5 billion worth), 2 million—and counting acres of timberland, power plants in emerging economies like Chile, and the traditional specialty finance fare. To grow operating cash flow per share by 35% in 2006, 45% in 2005, double its share price since 2004 to $55, and obtain a $20b market value from $70b in assets under management, BAM used a Buffett-like business model: 1) Strict value investment. 2) Contrarianism. 3) High quality long-term asset purchases after extensive research. 4) Taking small positions in new markets to learn the business. 5) Retaining good management. Assets are deemed investment-worthy by requiring minimal ongoing capital investment, steady, growing cash flows, and requiring reasonable debt for purchases. BAM recently profitably walked away from a bidding war over Mills Corp. (MLS) with Simon Property (NYSE:SPG), in order to stay within its return-on-value guidelines. BAM's next focus is on infrastructure such as ports, pipelines and railroads. Rivals like Goldman Sachs (NYSE:GS) are following suit, which BAM CEO Bruce Flatt says could pressure prices in the short-term, but in the long-term will create new markets. Barron's Bottom line: BAM's Buffett-like investments could yield more Buffett-like profits, sending shares to $70.