Brookfield Asset Management: An Attractive Long-Term Investment

Brookfield Asset Management (BAM) has been on my watch list for quite sometime, and I finally purchased a "toe in the water" position during Friday's sell-off. The company has a great long-term record, and shareholder-friendly management. If you look at a 15-year performance chart on BAM, you will see that they have not only handily beaten the S&P 500- they have also beaten Berkshire Hathaway (BRKA).

BAM is basically a publicly traded private equity company, but you don't need to pay high management or incentive fees. I like the idea that they are focussed primarily on global infrastructure asset management as opposed to general private equity.

The company manages and builds high quality, long-life cash flow generating assets with barriers to entry, and it has shown good discipline in choosing projects with a high return of capital. At this time, its main areas of focus are in property, power, timber, and transmission in several regions around the world.

BAM is a cash flow cow. In 2006, its cash flow grew from to $1.8 billion (from 908MM in 2005).

It is planning to spin-off a newly created publicly traded partnership (Brookfield Infrastructure Partners LP), which should be very attractive to income-oriented investors. I think the sum of the parts after the spin-off will be greater than the whole.

The recent Minnesota bridge collapse highlights the importance of infrastructure projects not only overseas, but in the U.S. as well, and I believe more money will be allocated to infrastructure in the U.S. in the near future. I plan to continue dollar cost averaging into BAM, and retain it as a long-term holding.

Full disclosure: The author is long BAM

See also: Brookfield Asset Management Q2 2007 Earnings Call Transcript