BAM - Brookfield Asset Management

[Gregmal]

While its never a good idea to ignore things outright, I would simply ask folks if they know who is behind Empire Financial research? No, it is not "the guy who called AAPL at $1.60" like the spam adds disingenuously say. It is the guy who blew up his hedge fund while basically mimicking Bill Ackman's trades(back when Ackman was killing it, pre VRX) and now sells newsletters. A shameless self promoter and attention seeker.

[thepupil]

While its never a good idea to ignore things outright, I would simply ask folks if they know who is behind Empire Financial research? No, it is not "the guy who called AAPL at $1.60" like the spam adds disingenuously say. It is the guy who blew up his hedge fund while basically mimicking Bill Ackman's trades(back when Ackman was killing it, pre VRX) and now sells newsletters. A shameless self promoter and attention seeker.

 

the author of the article is not Whitney Tilson, it is Keith Dalrymple, who I had previously not heard of. Seems to be a short seller / research type.

 

I wouldn't ignore it because of Tilson (I like Tilson more than most, but that's beside the point)*.

 

There are a number of these short seller / sresearch firms that dig into Brookfield and find fault.

 

Roddy Boyd https://ffj-online.org/2013/11/18/brookfields-looking-glass-world/

 

Dialectic Capital https://www.valuewalk.com/2012/11/dialectic-presents-the-confusing-case-of-brookfield-asset-management/)

 

Now Mr. Dalrymple

https://www.wsj.com/articles/short-seller-who-took-on-porns-new-king-is-still-standing-1446575618

 

Thus far, Brookfield has proven the worst of the projections wrong. Generally, I think the shorts as it related to Brookfield get a lot of things right, but then fail to properly quantify things or overly extrapolate. Like "look here Brookfield did this crappy thing against minority shareholders" or "look Brookfield [put too much debt on these assets". And it's like "yes, they screwed those people" and "yes that asset which comprises 1%,2%, 5% of NOI may need to restructure, tell me why the stock is worth zero again...".

 

 

*a young pupil very much appreciated his work on Berkshire and put it to very profitable action in the ensuing decade.

 

 

[K2SO]

I don't know if the Brookfield bears are right. But there's enough for me to say that BAM is in the "too hard" pile, no matter how much I admire what I know of Flatt and the team from a distance. BPY has always been really aggressive and raises enough question marks to have kept me out of BAM.

 

I do own a bit of BBU though.

 

[Castanza]

FWIW: Brookfield potentially interested in WPD sale

 

https://finance.yahoo.com/news/iberdrola-brookfield-said-consider-bids-153157770.html

[fareastwarriors]

Brookfield Properties’ retail arm is laying off 20% of its workforce, as pandemic hits malls

 

https://www.cnbc.com/2020/09/22/brookfield-properties-retail-arm-is-laying-off-20percent-of-its-workforce.html

[fareastwarriors]

Brookfield Properties’ retail arm is laying off 20% of its workforce, as pandemic hits malls

 

https://www.cnbc.com/2020/09/22/brookfield-properties-retail-arm-is-laying-off-20percent-of-its-workforce.html

 

Brookfield and Namdar plan to hand over keys to struggling malls

CMBS loans on Brookfield’s Florence Mall in Kentucky and Namdar’s Fashion

 

https://therealdeal.com/2020/09/23/brookfield-and-namdar-plan-to-hand-over-keys-to-struggling-malls/

[ValueMaven]

Annual Investor Day today for BAM and subs.  Will be extremely interesting.  Will post some of my thoughts afterwards or tonight.  Will be interesting to see the material they present.  This is a massive position for me BTW - so I always try and maintain a very skeptical approach. 

[StevieV]

Annual Investor Day today for BAM and subs.  Will be extremely interesting.  Will post some of my thoughts afterwards or tonight.  Will be interesting to see the material they present.  This is a massive position for me BTW - so I always try and maintain a very skeptical approach.

 

Looking forward to your post.

 

[Xerxes]

Anyone find it irritating that on the Apple stockchart App, they haven't fixed BAM share split. The 2/3 share split happened exactly at the same time as the market crash in Q1, so the stock chart looks really weird. The peak shows $90 CAD, but anything after that the price has been adjusted. The $90 peak is really $60 peak (post-adjustment).

 

Currently on the chart it looks like a 50% drop, but that is not true. More like a 30% drop.

 

Anyways, on a different note, check this out, looks like in Q2, Markel loaded the boat on BAM. Its now second largest after Berkshire and above Amazon. Pretty static overall.

 

https://www.holdingschannel.com/13f/markel-corp-top-holdings/

[petec]

Those investor day presentations are dangerously seductive! Very happy to have a big position in BAM at this price. And props to Markel for copying me ;)

[John Hjorth]

Anyone find it irritating that on the Apple stockchart App, they haven't fixed BAM share split. The 2/3 share split happened exactly at the same time as the market crash in Q1, so the stock chart looks really weird. The peak shows $90 CAD, but anything after that the price has been adjusted. The $90 peak is really $60 peak (post-adjustment).

 

Currently on the chart it looks like a 50% drop, but that is not true. More like a 30% drop.

 

Anyways, on a different note, check this out, looks like in Q2, Markel loaded the boat on BAM. Its now second largest after Berkshire and above Amazon. Pretty static overall.

 

https://www.holdingschannel.com/13f/markel-corp-top-holdings/

 

Xerxes,

 

It's the BAM stock split you see on holdingschannel. A good way to check it up is to compare with the records on Dataroma.

 

[Xerxes]

Thanks !!

I’ll double check that. Make sense since Markal didn’t do anything in Q2 so kind of surprising to see increase on BAM.

 

The math though doesn’t add up completely for stock split.

 

8,700,661 shares times 3 divided by 2 gives 13,050,991.

The delta between the two, I.e what they would have received as stock dividend, is shown to be 2,900,220 only on my site.

 

I need to dig deeper.

[Xerxes]

https://www.dataroma.com/m/activity.php?sym=BAM&typ=b

 

I stand corrected.

Not sure why the math doesn't add up for the share count, but there nothing added on that position by Thomas Gayner of Markel. But still their 2nd largest position.

 

Interesting though his buys of Brookfield as been a steady buy every quarter or so (see link) since 2015, like an RRSP contribution.

 

[petec]

He has said in the past that one of his advantages as a portfolio manager is the steady flow of profits from underwriting, which allows him to add to conviction ideas and allow lesser ideas to shrink - essentially he can reduce position sizes without having to deal with any of the psychological issues around selling.

[John Hjorth]

Xerxes,

 

Thank you!

 

Pete,

 

Those investor day presentations are dangerously seductive! Very happy to have a big position in BAM at this price. ...

 

I agree!

[ValueMaven]

I own a lot BAM, and some modest exposure to BIPC.  I'm less interested in retail and have limited exposure there.  Valuation on the renewable business is high for my appetite. 

[NotSoWise]

After reading the 24th Sep BAM presentation, with billions here and with billions there on every page and how rosy its gonna be with increasing asset valuations in the low interest rate environment - I start to wander about their entry vs. exit multiples assumptions in their Investment Committee Deal Memos (or whatever they call it).

 

Maybe a question to US/ CAN guys - are they still paying reasonable prices for assets vs peers?

 

I have BAM stock (5 years by now) so I am not biased against them - possibly quite opposite. I also think that more money will flow to alternative managers over the next decade, just wander how their returns will look like with increased size and big push for growth. Would they remain disciplined or older partners will become more greedy for fees at the expense of long term...

[StevieV]

I didn't like when they changed the "plan value" multiple on FRE from 20x to 25x.  25x is a bit rich.  If I recall correctly, they changed it when the share price got close to the plan value.  If the share price would approach the current plan value, would they move it again.  Maybe they'd move the carried interest plan value multiple from 10 to 15.

 

Anyway, the growth is key.  Keep growing in the double-digits and things work out.

[ValueMaven]

Yes.  It is rich.  However, mgmt has stated that they applied this 'adjustment upwards (from 20x to 25x)' b/c of the prolonged low interest rate environment.  Take that for what you may.

[John Hjorth]

After reading the 24th Sep BAM presentation, with billions here and with billions there on every page and how rosy its gonna be with increasing asset valuations in the low interest rate environment - I start to wander about their entry vs. exit multiples assumptions in their Investment Committee Deal Memos (or whatever they call it).

 

Maybe a question to US/ CAN guys - are they still paying reasonable prices for assets vs peers?

 

I have BAM stock (5 years by now) so I am not biased against them - possibly quite opposite. I also think that more money will flow to alternative managers over the next decade, just wander how their returns will look like with increased size and big push for growth. Would they remain disciplined or older partners will become more greedy for fees at the expense of long term...

I didn't like when they changed the "plan value" multiple on FRE from 20x to 25x.  25x is a bit rich.  If I recall correctly, they changed it when the share price got close to the plan value.  If the share price would approach the current plan value, would they move it again.  Maybe they'd move the carried interest plan value multiple from 10 to 15.

 

Anyway, the growth is key.  Keep growing in the double-digits and things work out.

Yes.  It is rich.  However, mgmt has stated that they applied this 'adjustment upwards (from 20x to 25x)' b/c of the prolonged low interest rate environment.  Take that for what you may.

 

Perhaps an idea to ask BAM to disclose the quarterly accounts of BAM, the parent? [[like Berkshire does once yearly], which BAM doesn't]

[petec]

Yes.  It is rich.  However, mgmt has stated that they applied this 'adjustment upwards (from 20x to 25x)' b/c of the prolonged low interest rate environment.  Take that for what you may.

 

Is that right? I thought it was because they thought they’d entered a new higher growth phase, having completed the structural reorganization and built out the platform.

 

I don’t like 25x either, but I believe they use plan value for setting internal comp targets so it’s not primarily a marketing tool, and they lay it out in a way that allows you to insert your own metrics into the matrix which works for me.

[John Hjorth]

Yes.  It is rich.  However, mgmt has stated that they applied this 'adjustment upwards (from 20x to 25x)' b/c of the prolonged low interest rate environment.  Take that for what you may.

 

Is that right? I thought it was because they thought they’d entered a new higher growth phase, having completed the structural reorganization and built out the platform.

 

I don’t like 25x either, but I believe they use plan value for setting internal comp targets so it’s not primarily a marketing tool, and they lay it out in a way that allows you to insert your own metrics into the matrix which works for me.

 

It's a fun & interesting discussion, and nobody really knows [about the future growth rate, from here]. Really not much unlike anything that I know of, as of now.

[Xerxes]

My thoughts on the BAM AGM:

 

If Berkshire AGM is the extreme optics of one capital allocator deciding everything on-the-go, heavy on intuition, light on PowerPoints, the BAM AGM is the other extreme. And I can also add perhaps Blackstone to it. Heavy on PowerPoints, heavily process driven, and you can feel the institutional power behind it.

 

I don't know if from a 50,000 feet point of view, we are fast moving from the Age of One-Man-Show Capital Allocators (the likes of Buffet and Watsa) into the Age of Asset Managers (the likes of Blackstone and Brookfield). Reading Schwarzman's book, one clearly gets the impression that he has been heavily pushing Blackstone to be a process-driven institution built to last for the ages. So much so that he had enough time to build a University in China. The original Brookfield may not Bruce Flatt's personal creation, but today's Brookfield has his fingerprints all over it, and is also a process-driven institution. 

 

Specifically on the AGM:

- on slide 14, it says BEP was created in 2011 in the chart; i thought it was created in the late 90s. Not sure why there would such a obvious mistake

- on slide 47, where the CFO is comparing the valuation with a 25x multiples, he seem to have $33.1 billion value as invested capital* both in 2019 and 2020 year. Surely it must have changed.

- i only counted twice-three times Bruce saying: "I would just say ..." .. so that is an improvement

 

*. Investments in listed entities measured at closing prices on June 30, 2020, excluding BPY which is measured at its IFRS value. Invested capital is

net of corporate debt and preferred equity

 

 

 

 

[John Hjorth]

Xerxes,

 

I'm not in any way trying to nitpick your last post here, but I suppose you're referring to the BAM & subs Investor Day presentations [videos &  PP materials], right?

[Xerxes]

yes sir,

https://bam.brookfield.com/~/media/Files/B/BrookField-BAM-IR-V2/ir-day/2020/BAM%20IR%202020.pdf

See above. They show BEP was created in 2011, an hour later in the BEP meeting, they are actually saying BEF was created in the late 90s-2000, which is in fact correct.

 

https://bam.brookfield.com/~/media/Files/B/BrookField-BAM-IR-V2/ir-day/2020/BEP%202020%20Investor%20Day%20Presentation%20-%20Final.pdf

See chart 16, the distribution at BEP starting in 2000.

 

But then I educated myself on the history: ref: Wikipedia

 

Brookfield Renewable Power Fund originated as the Great Lakes Hydro Income Fund before changing its name in 2009.[8] Brookfield used its majority stake in Great Lakes Power as its primary vehicle to advance its interests in the renewable energy sector. When Great Lakes Hydro Income Fund completed its initial public offering on the Toronto Stock Exchange in 1999, Brookfield Asset Management (then known as EdperBrascan) owned 61% of outstanding units through its various subsidiaries.[9][10] Initially, Great Lakes Hydro's assets were limited to three hydroelectric facilities in Western Quebec with a combined capacity of 238MW.[10] By the end of 2008, the fund owned and operated 27 hydroelectric facilities and one wind farm with a cumulative capacity of 1,021MW.[11] These assets were spread across four jurisdictions: Ontario, Quebec, British Columbia, and New England.

 

Brookfield Renewable Energy Partners, LP

 

On September 13, 2011 Brookfield Asset Management and Brookfield Renewable Power Fund announced they intended to merge the Fund and the power generating assets owned by Brookfield Renewable Power Inc to form Brookfield Renewable Energy Partners, LP.[13][14] When the transaction closed, Brookfield Asset Management owned 73% of the combined entity, which trades on the Toronto Stock Exchange under the symbol BEP-UN [15] and on the New York Stock Exchange as BEP. The new entity is the primary vehicle through which Brookfield acquires and operates renewable energy assets, with initial assets, and development projects in Canada, the US, and Brazil. The transaction closed on November 30, 2011.[16]