1/ $Brookfield Corp(BN)$ is the largest alternative investment manager in the world.
It is set to double assets under management in the next 5 years, yet the stock is still undervalued.
It benefits from tailwinds like the green transition and digitalization.
Here is my BN investment thesis: 🧵
2/BN is an alternative investment manager.
Stocks, bonds, and valuable metals are regarded as traditional assets.
Others are counted as alternative ⎯ infrastructure, private equity, renewable energy...
Brookfield hit $1 trillion in assets under management (AUM) last year.
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3/ It operates through three segments:
- Asset management
- Wealth solutions
- Operating businesses
Asset management raises capital from investors and deploys it to funds.
Wealth solutions provide annuity and insurance services.
Operating segment owns and runs businesses.
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4/ BN invests mainly in five strategies:
- Renewables
- Infrastructure
- Private equity
- Real estate
- Credit
Brookfield has secular tailwinds behind it as these asset classes are set for explosive growth in the next 5-10 years.
Let me explain:
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5/ We have $15 trillion infrastructure investment gap globally.
Guess who is one of the leading infrastructure investors in the world? It's $BN.
It currently has infrastructure investments in over +300 regions globally.
As investment ramps up, it'll see massive opportunities.
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6/ Renewables is another tailwind ahead.
Market researches project that renewables will account for 50% of global electricity demand.
BN, through its subsidiary Brookfield Renewable Partners, is one of the leading renewable investors in the world.
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7/ Growth in wealthy individuals will also drive demand for alternatives.
The number of ultra-high net worth individuals doubled in the last decade, and it's projected to double again in the next 5 years.
These people heavily invest in alternatives through family offices.
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8/ Result? Demand for alternatives will skyrocket.
This will be driven by infrastructure investment, green transition, and individual wealth growth.
BN projects AUM in alternatives will more than double by 2032.
As the leading manager, BN will take the lion's share.
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9/ BN financials are rock solid, it can support any expansion effort or weather economic storms.
It has $6.4 billion deployable capital at the corporate level against just $4.8 billion of recourse debt due in the next 5 years.
This got it an A-credit rating from Fitch.
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10/ Valuation is fair.
Brookfield generated $6.2 billion distributable income (DE) last year.
Management expects 15% annual DE growth for the next 5 years.
This gives us $12.5 billion DE for 2030.
At 15 times exit multiple, we get $187.5 billion company, promising a 12% annual return on the current valuation.
Given the quality of the business, this is an extremely attractive price to add it as a foundational position in the portfolio.
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