Brookfield behemoth performs like a growth stock

Analysts follow as many as 20 stocks, most of which are rated “buys”. Of those buys, an analyst has one or two special favorites seen as most suitable for new buying. David Baskin, president of Toronto-based Baskin Wealth Management, says that, in a low growth world, Brookfield Asset Management’s growth rate is akin to the performance of growth stocks.

With office towers in Toronto, a shopping centre in Sao Paulo, a fiber optic network in France and a freight railway in Western Australia, global stock Brookfield Asset Management Inc. (TSX─BAM.A), is nothing, if not far-flung.

But is that a problem? No, says David Baskin.

“Brookfield seems to be capable of managing its worldwide platform from Canada,” says Mr. Baskin, president of Toronto-based Baskin Wealth Management.

“I haven’t noticed that they’re not getting the job done.”

And they are indeed, if Brookfield’s return on equity is any indication. At roughly 17 per cent, it’s now more than eight times the current yield on a 10-year government of Canada bond.

Giant acting like growth stocks and bargain stocks

But the company’s strong return is just one reason why he’s singled out Brookfield. He also likes its strong rate of growth — now roughly 10 per cent a year.

“In a low-growth world, to be able to grow a company at that rate is pretty impressive,” says Mr. Baskin, noting that Brookfield is now taking in $23 billion in revenue.

Another plus? The attractiveness of the company’s assets to institutional investors. Because Brookfield’s holdings are mostly infrastructure, the income they generate is steady and predictable — something that’s crucial to pension funds and insurance companies which typically have long liabilities.

Moreover, at roughly $41 and change, the company is also a bargain stock, given that it traded at $48.65 just four months ago. In fact, with Brookfield’s net asset value now likely $55 a share, investors can buy its stock at a 25 per cent discount.

For Mr. Baskin, Brookfield Asset Management is a best buy.

From its Toronto headquarters, Brookfield oversees its stable of assets on five continents. Besides railways, communications, as well as commercial properties, the company owns electric power dams, wind farms, pipelines and timberlands, among other things.

Income falls in Q2, but up for first six months

For the three months ended June 30, Brookfield’s net income fell to US$1.2 billion or $0.62 a share, from $1.6 billion, or $0.79 a share, for the similar period in 2014.

Not surprisingly, funds from operations were also lower, sliding to US$520 million, or $0.50 a share, from $569 million, or $0.56 a share, for the similar period in 2014.

For the six months ended June 30, Brookfield’s net income rose to US$2.6 billion or $1.35 a share, from $2.4 billion, or $1.32 a share, for the similar period in 2014.

Funds from operations also presented a brighter picture, increasing to US$1.07 billion, or $1.04 a share, from $1.06 billion, or $1.04 a share, for the similar period in 2014.

 

Investor’s Digest of Canada, MPL Communications Inc.
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