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Brookfield Corporation Class A Limited Voting Shares (BN)
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Brookfield Asset Management Ltd. Class A Limited Voting Shares (BAM)
BN is currently undervalued per Morningstar (price of $56 vs fair value of 60+ if I remember correctly)
Would you agree with this valuation?
I am currently owning both BN and BAM. The BAM holding was spun off from the BN holding. I just want to simplify into 1 holding. Would it make sense to sell BAM and add to BN here? My priority is growth as the horizon is 10 + years. Thank you very much.
We think both BN and BAM are trading within the fair valuations: not too cheap, not too expensive and still offer potentially good returns going forward. We would not put too much weight on whether these companies are trading at 5%, or 10% under/overvalued, what matters are business fundamentals over the long term, which we are totally comfortable with given the track record of value creation. In terms of whether it makes sense to consolidate into one holding, we think it depends on investors’ preference for reinvestment or dividend growth, we would be okay to switch to owning only BN if investors’ objective is to compound capital over time. BAM is more of an income investment, with its goal to distribute most of its cash flow to shareholders. Morningstar uses a 'black box' evaluation methodology, which often does not capture the 'nuance' of superior companies such as these two.