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Brookfield Investor Day 2021: Building Empire At Full Throttle

Alexander Steinberg profile picture
Alexander Steinberg


  • BAM plans to double its business or better in 5 years implying 15% per year growth.
  • BAM also expects to generate $39B of free cash flow over the same period. If half of the cash is allocated to buybacks, the return per share may be closer to 20%.
  • This growth is possible due to the introduction of new businesses, namely Insurance, Transition, Technology, and Secondaries.
  • Insurance and Transition seem particularly promising because of the total addressable market, global tailwinds, and Brookfield's existing skills.

Solar energy and wind power stations
zhongguo/E+ via Getty Images

I published a similar article a year ago when Brookfield Asset Management (NYSE:BAM) was a good buy at $34. The company has done very well since but the stock may have outrun the business as I posted recently. Still, Brookfield

This article was written by

Alexander Steinberg profile picture
Ph. D. and MBA. I worked in executive/management positions for big US companies, then ran my own business for about 15 years, and upon exiting, turned to full-time investing. I primarily manage my own funds and consult a limited number of friends and clients.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of BAM, BIP either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (19)

DerekCheung profile picture
@Alexander Steinberg what do you think of BAM's announcement:


Do you see this unlocking value and SOTP becomes delivered to shareholders?
Alexander Steinberg profile picture
@DerekCheung This is their idea. I need to do some analysis and may publish it when done. It is not entirely clear that it will necessarily elevate the stock as FRE is already valued high even without spinoff.
DerekCheung profile picture
@Alexander Steinberg Thanks Alexander. I would appreciate your insights when you are able to do the analysis.
Could you comment on BAMs interest rate sensitivity? At a trivial level, of course, rising rates are not a friend for BAM and most other companies, but I don't have a good feel for how to compare BAMs sensitivity relative to various other investments. SPY, tech stocks, high yield, various other types of fixed income, etc -- all will react in different degrees to the (likely) upcoming environment of tightening financial conditions and I don't know where to slot BAM in that environment.

So, for example, I suspect BAM will have less sensitivity to rising yields than tech stocks or bonds; less fear reaction to quality concerns than high yield and lower-rated companies with greater refi risk. However, BAM is still pricey and subject to changed market perceptions about capital cost, profitability, and possibly forced changes to growth plans as the environment changes.

Among asset managers, I suspect BAM has less rate risk than, say, BX due to the differences in their investments.

Any insight here appreciated.
Alexander Steinberg profile picture
@uptownguy Unfortunately, I am not ready to provide you with a quantitative metric. However, I suspect that BAM will not be very sensitive to the interest rates as long as they are "lowish" (I am quoting Bruce Flatt). Typically, higher interest rates are linked to higher inflation. And BAM has built inflation accelerators in many of its cash flows. So, with interest rates gradually growing, FFO will be growing as well apart from all other factors. Secondly, over the last several years, BAM has refinanced its debt increasing its duration significantly over its portfolio.
I be we see a 3:2 stock split announcement this week or next. Price is closing in on $60...
call me the sloth profile picture
Thank you for this nice summary.

I think the strategic ambitions in software/Technology will arguable be the most interesting to see unfold. That is the area with the greatest risk of being a money sink, on one hand. On the other, if they can develop new tech and/or allocate well in the venture space, could be hugely accretive into the future.

A small note on the BEP section, one of the bullets says "Connor Teskey, BEP's CEO..." and another "Wyatt Hartley, BEP's CEO..." Is that a typo or they are co-CEO, or..? Just thought I'd flag. Cheers.
Alexander Steinberg profile picture
@call me the sloth Thanks for your comment. This is my typo - Hartley is the CFO, will correct. They will not develop any technology themselves. Their idea is to invest in venture capital in companies that develop technology Brookfield can use in its business and scale up - smart locks for example. Regarding mature type situations - it will be well-established applications that generate stable cash flows.
call me the sloth profile picture
@Alexander Steinberg Ah, I see. Thank you for the addition and clarification.
BAM has several failures too like EAF, Teekay. BBU is the weakest. They even could not sell Westing house or batteries manufacturing unit which is outdated. BAMR is more than 10% down. I think Blackstone is ten times better
@jagrutcga Can you explain what you mean by failure? They made many times their original investment in GrafTech and it continues to be a source of cash as they keep selling.
Alexander Steinberg profile picture
@jagrutcga EAF was an amazing success for BBU. I mentioned Teekay in the text. BAMR is irrelevant as their stock price will mimick BAM. BBU is doing a lot of transactions, so some mistakes are inevitable. On the strategic level, only BPY was a clear failure.
Landlord Investor profile picture
“Overall, Brookfield plans to source $25B out of real estate currently on the balance sheet.”

Any idea how they will be reducing BPY’s liabilities/preferreds as they reduce assets to maintain a healthy balance sheet?
Alexander Steinberg profile picture
@Landlord Investor They did not go into details but here how I understand it: preferreds will remain there. Debt is primarily on the asset level. So some malls will be sold, others will be given to creditors. Most likely the process will be rather long.
teemacsj profile picture
A scan of the proxy shows that Flatts equity stake grew by $40MM over the past year. Clearly, he has an uncommon level of congruity with BAM.a shareholders. It is a massive understatement to say he is ‘all in’. That says something to me about Brookfield’s ambitions and likelihood to continue to succeed.
So if the price is a little high now, why would they want to to a buy back?
Joe4888 profile picture
@LexingtonGreen Because it remains a good long-term investment and averaging the purchases over time is generally a good strategy.
Alexander Steinberg profile picture
@LexingtonGreen They have not done buybacks on a massive scale so far. They will have a financial capacity to do it big way in the future provided that the price is right.
bluescorpion0 profile picture
maybe they will merge with Berkshire one day. the brk energy ceo has Canadian roots. must know about bam
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