"The Canary Wharf Estate — Secret Society #4"

OK, so moving on … this one took a little more time, but I think we’ve worked out the ‘The Canary Warf Estate” so it can join the first four secret socieities we’ve sniffed out from the Porter Stansberry Investment Advisory teaser.

Here’s what this one owns:

Part of Canary Wharf (a big London office development).

“14 office buildings in New York, 2 in Boston, 32 in Washington DC, and 22 in Los Angeles.”

129 “power generating stations.”

“over 6,000 miles of power transmission lines.”

And, to whet your appetite, “They have “given shareholders 884% gains since the beginning of 2000.”

Other specific clues?

49% year over year earnings growth in the last quarter.

Shareholder return of 513% since “the beginning of 2003.”

So what are we looking at here?

It’s yet another holding company, but this one’s a little bit different — it’s primarily an investment management firm, it Canadian, and it’s …

Brookfield Asset Management (BAM)

BAM! Love that ticker symbol. And we’ve seen this one teased before, back when Navellier was calling this the next Berkshire Hathaway (or calling Bruce Flatt the next Warren Buffett … I forget which). Navellier could well have sold it since then, that was a long time ago.

Brookfield, formerly known as Brascan, is known for a lot of things — a strong presence in Brazil, including a homebuilding firm that went public down there in the last year or so, a nice portfolio of hydroelectric power, lots of timber, and, of course, lots of real estate holdings, including the aforementioned piece of Canary Wharf.

Like Macquarie in Australia, Brookfield focuses on infrastructure and helps investors, especially institutional investorts, to invest in infrastructure assets, especially things like electrical power (almost all of their power generation capacity is hydroelectric, too, which also has the benefit of being clean and green). The company itself owns interests in a lot of these properties, but they also leverage their influence, I suppose, because they also run specialty investment funds that invest in more or less the same kinds of assets.

I’ve liked this company for quite some time, but don’t own shares — they’ve always seemed a little pricey to me, though that’s not perhaps that fair. The PE is quite high, with a forward PE of about 37, much higher than the trailing PE of 20 or so, which must mean they sold some assets this year and I’m guesing that analysts are somewhat nervous about the growth potential of their real estate and timber holdings. Among the other holding companies we’ve looked at here BAM stands out as pricey partly because they’ve got a more asset-light model, as an asset manager, so that’s why we see a price/book ratio of 3.6, dramatically higher than Berkshire, Icahn Enterprises, or Loews.

I think part of my hesitation about the price of Brookfield comes because I haven’t taken the time to really understand the value of their holdings, many of which are probably on the books at lower than market prices … it’s starting to look like August might have been a real buying opportunity in this one, since that’s the only real hiccup in its shares that we’ve seen since 2000.

Any Brookfield fans or investors out there? Let us know what you think — again, it’s not much of a secret anymore, thanks to that incredible run of the last seven years, and it’s not much of a society, but it certainly is a well-respected, profitable asset manager with a pretty compelling (to me) portfolio of infrastructure, power, and real estate investments.

full disclosure: I current own shares of Berkshire Hathaway, but not any other firm or investment noted above.

The author will always disclose any direct long or short equity, debt or option position in any stocks written about as of the day of publication, and will not trade in any stocks mentioned for three days (72 hours) after publication. Full disclaimer is at the bottom of the page.

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"The California Club — Secret Society #3"

"The Secret Real Estate Rocket"

1. Count me as a fan of Brookfield Asset Management (BAM). My wife and I held a few shares of Brascan (a predecessor company), but we sold off because I couldn’t figure out the impact of the conversion to BAM. We’ve subsequently bought shares of BAM, and the company keeps making money for us.

   [Reply]

   Posted by Anonymous | October 6, 2007, 5:22 pm

2. Given the need for investment in infrastructure, the rise of Brazil, this does sound like something that should at least be followed for dips.

   [Reply]

   Posted by Anonymous | October 7, 2007, 1:44 am

3. According to Chris Meyer in his “Capital & Cisis” newsletter, BAM is set to spin off it’s infrastructure division sometime this month. Current shareholders will receive 1 new share for every 25 shares of Bam. Bam will retain 40% ownership and continue to manage the new company. BIP (Brookfield Infrastructure Partners) will contain 62% transmission lines – 38% timber and price around $25 per unit with a yield of approx. 5%. Meyer recommends holding onto Bam and it’s new spinoff. I currently hold some Bam in a IRA.

   [Reply]

   Posted by Anonymous | October 7, 2007, 1:24 pm

4. I also had shares of BAM that had done quite well for me. I held them thru a two splits and sold for a gain of 95% in just short of 2 years. I sold it and admit I do miss it although it has only gained another 5 points in the past year (so I’m happy that it seems I got out at the right time).

   PS Navallier no longer owns it

   [Reply]

   Posted by bg | October 9, 2007, 7:10 pm