Where to Invest When the Economy Goes "BAM"!

Have you been BIP-tized into the world of BAM?

Brookfield Asset Management (NYSE: BAM  ) is no cult, but with $24 billion in assets, it is something of an empire. With a focus on property, power, and infrastructure assets, BAM has spawned a couple of targeted spinoffs, in which it retains substantial ownership stakes.

A host of companies
As a former shareholder, I have serious respect for BAM's long-term track record of delivering shareholder value from the assets that form its empire. Although shares have taken a beating since the housing crisis reared its ugly head, the past 20 years of stock appreciation tell a more captivating story. But no matter how well-managed the company may be, it simply couldn't escape a global economic upheaval this severe.

BAM remains profitable despite incredible challenges to several of its core businesses. The company earned $93 million in the first quarter, less than half what it brought in a year earlier, but still solidly in the black. Cash flow fell 38% to $273 million; BAM's specialty funds and investments combined for most of that decline, while income from commercial property rentals and power generation showed some resiliency. BAM's corporate property interests come from its 50% stake in Brookfield Properties (NYSE: BPO  ) , and the company reported an occupancy rate of 96% for the quarter.

Brookfield Properties, in turn, spawned Brookfield Homes (NYSE: BHS  ) back in 2003; just in time for a meteoric rise along with the rest of the homebuilding sector, followed by a spectacular fall. While Brookfield Homes consoled shareholders with a smaller loss than last year, the numbers were definitely not encouraging. The homebuilder saw a 46% drop in revenue on 38% fewer home closings, and watched average home sales prices slide an additional 15% from the prior year. As I've noted previously in the case of related plays like USG (NYSE: USG  ) and Weyerhaeuser (NYSE: WY  ) , homebuilding in North American remains in a fundamental bear market despite a notable up-tick in investor sentiment. I still would place a giant "do not enter" sign next to equities like Pulte Homes (NYSE: PHM  ) .

The best of the lot
With that in mind, is there an attractive vehicle for exposure to the management expertise of the Brookfield empire without the unwanted exposure to housing? Fortunately, the answer is yes. Brookfield Infrastructure Partners (NYSE: BIP  ) principally holds electric transmission and timberland assets. BIP recorded adjusted net operating income of $8.8 million in the first quarter. That's a 53% decline from a year earlier, but by idling valuable timberlands and pursuing growth with a promising electric transmission development project in Texas, I see BIP as the best-positioned arm of the Brookfield empire to deliver shareholder value under any economic conditions for years to come.

Further Foolishness:

Brookfield Infrastructure Partners and USG are Motley Fool Inside Value selections. Brookfield Infrastructure Partners is also a Motley Fool Hidden Gems pick. Brookfield Asset Management is a Motley Fool Global Gains pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Christopher Barker captains yachts and writes about stocks. He can also be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns no shares in the companies mentioned. The Motley Fool has a disclosure policy.


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