You can become a lot richer by investing in the S&P500. This broad market index has delivered a total annualized return of 11% over the past thirty years. Therefore, a $1,000 investment made in an S&P 500 index fund three decades ago would have grown more than 2,000% to more than $22,250 today.
That’s a great return. However, it pales in comparison sample 18% annualized return (over 13,800% over the past 30 years) produced by Brookfield Corporation (NYSE:BN). Here’s an introduction to this wealth-creating juggernaut.
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Brookfield traces its roots back more than 100 years. The company has a rich heritage of ownership and operation Real assets such as infrastructure, real estate and renewable energy. It has evolved over the decades by leveraging its expertise to build adjacent platforms. Today it has three core businesses: alternative asset management, asset solutions and operations companies.
The company has built up its leading position alternative asset manager, Brookfield Asset Managementfrom the ground up. It has more than $1 trillion in assets under management (AUM), which competes with more well-known Wall Street firms Blackstone And KKR. It manages funds that invest in renewable energy, infrastructure, private equity and credit.
Brookfield Corporation owns nearly three-quarters of Brookfield Asset Management. It also holds the carried interest (percentage of profits) of legacy funds managed by that entity.
Second, Brookfield Wealth Solutions, a leader in its field, offers a range of pension services, asset protection products such as insurance and other solutions for companies and private individuals.
Finally, Brookfield has renewable energy companies (Brookfield renewable), infrastructure (Brookfield Infrastructure), business and industrial services (Brookfield Business), and real estate.
In many ways, Brookfield Corporation is very similar Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B). Like Warren Buffett’s company, it has insurance activities that offer additional capital to invest. The company also generates large amounts of cash flow through its operations and asset management platform, giving it more capital to invest. The company is spending this money on expanding its core businesses and some of its funds, which focus on buying high-quality companies on a value basis, similar to Buffett’s investment style..
Note, Brookfield Corporation has done a better job of increasing value for its investors over the decades than Buffett has. Its 18% annual return has crushed Berkshire’s 13% annual return over the past thirty years.
Brookfield Corporation aims to deliver annual returns of over 15% for its investors over the long term, and believes the company is better positioned today than ever to achieve that ambitious goal. for.
Several catalysts determine this vision. One factor is the growth the company expects for its three core businesses. It expects to grow its earnings per share by more than 20% annually over the next five years, driven by realizing carried interest earned in its funds, expanding its asset management business, further expanding its business in the field of wealth solutions, and skillfully allocating the vast amount of capital flowing into its businesses.
On that last point, Brookfield expects cumulative free cash flow of $47 billion, or $30 per share, over the next five years, which can be used to grow shareholder value.
The company has aligned its investment strategy to capitalize on several key macroeconomic themes, including decarbonization, deglobalization and digitalization. It is investing its funds and capital in these megatrends, which should deliver outsized returns for fund investors and Brookfield.
These factors underline the company’s belief that it can grow its underlying value significantly in the coming years. Brookfield currently estimates its value at $84 per share (well below the current share price of less than $60). It believes it is the value of the company to $176 per share in 2029 – a compound annual rate of 16%. Given the lower share price, the total return for shareholders would be even higher, at over 25% annually.
Brookfield Corporation has done a phenomenal job of increasing value for its shareholders, crushing the returns of the S&P 500 and Warren Buffett’s Berkshire Hathaway over the past thirty years. Given the strength of its core businesses and its alignment with several key investment themes, it firmly believes that better days lie ahead. These factors position the company to continue to beat the market and make it big a great one shares to hold for the longer term.
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Matt DiLallo has positions in Berkshire Hathaway, Blackstone, Brookfield Asset Management, Brookfield Corporation, Brookfield Infrastructure Corporation, Brookfield Infrastructure Partners, Brookfield Renewable, Brookfield Renewable Partners and KKR and has the following options: Short January 2025 $60 calls on Brookfield Corporation. The Motley Fool holds positions in and recommends Berkshire Hathaway, Blackstone, Brookfield, Brookfield Asset Management, Brookfield Corporation, and KKR. The Motley Fool recommends Brookfield Infrastructure Partners, Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.
Meet the monster stocks that continue to crush the market, originally published by The Motley Fool
