While it hasn’t gotten the attention of tech stocks or AI stocks, shares of alternative asset manager Brookfield Corporation (BN) have been red hot this year, surging 66.5% over the past 12 months. What’s more, 13F filings show that super investors like Pershing Square’s Bill Ackman and Third Point’s Daniel Loeb loaded up on the stock during the third quarter.
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I’m bullish on Brookfield based on its sterling long-term track record of delivering market-beating returns, compelling long-term vision for the future, the large positions that top investors like Ackman and Loeb are taking in the stock, and its perfect 10 rating from TipRanks’ Smart Score system. Let’s take a closer look at this $85 billion company.
What Is Brookfield Corporation?
Brookfield Corporation describes itself as a “leading global investment firm focused on building long-term wealth for institutions and individuals.” The Toronto, Canada-based firm is an alternative asset manager that operates businesses in a wide array of industries, including asset management, real estate, infrastructure, renewable energy, private equity, and more.
Loeb’s Third Point Capital, which has nearly $7.5 billion in assets under management, initiated a new position in the company, buying 4,725,000 shares for an average price of $53.15 per share, according to the firm’s 13F filing. Brookfield is Third Point’s eleventh-largest holding as of the filing.
At the same time, Bill Ackman’s firm Pershing Square, which was already an investor in Brookfield after initiating a position during the second quarter, increased its stake in the company by nearly 380%. Pershing Square now owns 32,735,883 shares of Brookfield and is the fund’s largest holding, accounting for 13.5% of assets, indicating that Ackman has significant conviction in the pick and sees it as one of the best investment opportunities in the current market.
Building a Sterling Long-term Track Record
Brookfield has proven itself to be a long-term winner. Over the past decade, the company has delivered a phenomenal total return of 800%. This massive total return easily outpaces that of the broader market — the Vanguard S&P 500 ETF (VOO) returned 187.3% over the same time horizon.
And Brookfield’s track record of generating exceptional returns goes back even further then that — the company has delivered a phenomenal total annualized return of 18% over the past 30 years.
Laying Out a Compelling Vision for the Future
While Brookfield has an excellent long-term track record, it isn’t resting on its laurels — it says that its best days are still ahead of it and that it is now better-positioned than ever before to deliver annualized returns of 15% or more going forward.
Brookfield’s management says it will achieve this by investing in good businesses, running these businesses well, wisely allocating free cash flow, aligning everyone with its long-term goals, and adapting to the changing world around them. Examples of the company adapting to the changing world include its extensive investments in the energy transition and its involvement in data centers.
Brookfield management says it expects to grow free cash flow by 20% per share on an annual basis over the next five years. This means it will generate a total of $47 billion in free cash flow over this time frame, or $30 per share that it can “allocate wisely,” which is an attractive total given that shares currently trade for $57.67. Brookfield says this will help it to deliver annualized returns on invested capital of 16% over the next five years.
Brookfield Believes Shares Are Worth $84
While shares currently trade for $57.67, Brookfield believes they are worth an intrinsic value of $84 per share today and that this 16% CAGR on invested capital will bring it to a valuation of $176 per share by 2029, meaning that the share price could be more than triple over the next five years. Obviously, a lot can happen between now and 2029, and even the best plans can face unexpected challenges. There’s also certainly no guarantee the market will agree with Brookfield about the intrinsic value of its shares at that point in time.
That said, even if Brookfield doesn’t reach this exact number, there is plenty of room for considerable upside between the current share price and Brookfield’s target, making this a tempting value proposition for investors. Brookfield also believes that it is well-positioned to grow earnings per share at a 20% clip over the next five years to $9.77 per share (up from $3.67 for 2024). If the company can achieve this, it is trading for a song at today’s prices.
While these are lofty targets, Brookfield’s excellent track record over multiple decades lends credibility to the idea that the company can achieve many of these goals.
Returning Capital to Shareholders
While Brookfield has a fairly low dividend yield of 0.6%, it’s worth noting that it has still returned an impressive $20 billion worth of capital to its shareholders over the last five years through both dividends and share buybacks. With cash flow expected to increase in the years to come, as discussed above, I would expect the company to continue to reward its shareholders with considerable capital returns.
Is BN Stock a Buy, According to Analysts?
Turning to Wall Street, BN earns a Moderate Buy consensus rating based on four Buys, zero Holds, and one Sell rating assigned in the past three months. The average BN stock price target of $60 implies 2.4% upside potential from current levels.
Adding to Brookfield’s appeal, it also achieves a Perfect 10 rating from TipRanks’ Smart Score system. The Smart Score is a quantitative stock scoring system created by TipRanks. It gives stocks a score from one to 10, based on eight key market factors. Scores of eight, nine, or 10 are considered equivalent to an Outperform rating, so Brookfield’s perfect rating is particularly impressive.
Invest Like Ackman and Loeb
Shares of Brookfield have posted strong gains over the past year, and the stock is catching the eye of renowned investors like Third Point’s Daniel Loeb and Pershing Square’s Bill Ackman. But you don’t have to be a hedge fund manager to gain exposure to this compelling investment opportunity; everyday investors can add Brookfield to their own portfolios. If management can execute on achieving this five-year vision, this would represent phenomenal returns for all of the stock’s investors.
I’m bullish on Brookfield based on the confidence of these prestigious investors, its track record as a long-term winner, and its compelling roadmap for delivering substantial returns over the next five years.
