I own over 100 stocks. I like to have a well-diversified portfolio. I also often take a basket approach to investing in a specific theme rather than attempting to uncover the one company that will deliver the best returns in a given trend.
However, if I could only buy and hold a single stock, it would be Brookfield Corporation (BN 3.85%). The global investment manager sits at the intersection of several of my highest conviction investment themes. That puts it in a strong position to produce robust returns in the coming years.
Image source Getty Images.
A world-class investor
Brookfield Corporation is one of the world's leading global investment firms. It has three distinct businesses, each of which will benefit from strong growth drivers in the coming years:
- Alternative asset management: Brookfield Corporation owns 73% of Brookfield Asset Management, a leading global alternative investment manager with over $1 trillion in assets under management (AUM).
- Wealth solutions: Brookfield Wealth Solutions provides retirement services and wealth-protection products.
- Operating businesses: The company has a portfolio built around four operating businesses. It has a 26% interest in Brookfield Infrastructure, a 46% stake in Brookfield Renewable, a 68% interest in Brookfield Business, and owns 100% of Brookfield Property.
The company is at the forefront of several global investment megatrends. Its businesses are capitalizing on AI infrastructure, decarbonization, increased investor allocations to alternatives, the expansion of private credit, and the commercial real estate recovery. These catalysts position Brookfield Corporation to grow its earnings significantly in the coming years, supporting its long-term target of delivering total annualized returns above 15% for its shareholders.
NYSE: BN
Key Data Points
A multitude of growth catalysts
Brookfield believes AI could become the most impactful general-purpose technology in history. To reach its full potential, the world will need to invest in building out the necessary physical infrastructure to support its adoption, including data centers and clean power production capacity. The company estimates that total spending on AI-related infrastructure will exceed $1 trillion this decade and $7 trillion over the next 10 years.
The company's ecosystem will create a virtuous cycle as it takes a multi-faceted approach to capitalize on this massive investment opportunity. Late last year, Brookfield Asset Management launched its inaugural Brookfield Artificial Intelligence Infrastructure Fund, anchored by an investment from Brookfield Corporation. The fund aims to acquire up to $100 billion of AI infrastructure assets. The first seed investments in the fund included the launch of the Brookfield-owned cloud services company Radiant and up to $5 billion in advanced fuel cells developed by Bloom Energy. Its affiliate, Brookfield Infrastructure, is investing up to $140 million into one of those fuel cell projects. That entity is also investing in building out several global data centers and in two U.S. semiconductor fabrication facilities. Meanwhile, Brookfield Renewable is investing heavily to build out additional renewable energy capacity to support AI data center demand.
AI infrastructure is one of the many trends Brookfield Corporation has positioned its business to capitalize on in the coming years. Another massive trend is the rise in individuals seeking alternative investments. They hold $40 trillion in wealth, which is nearly double the size of the institutional investor capital pool ($22 trillion). Brookfield created its wealth solutions platform to provide individuals with solutions such as annuities. Additionally, Brookfield Asset Management is developing investment products designed to meet the needs of individual investors.
Add in other growth drivers such as the recovery of commercial real estate and the expansion of private credit, and Brookfield believes its core businesses will grow its distributable earnings at a 20% annualized rate over the next five years. Meanwhile, Brookfield Corporation's three businesses generate robust and growing free cash flow, providing it with additional capital to allocate in creating value for its shareholders. The company believes its capital allocation strategy, which including share buybacks, fund investments, and acquisitions, will add another 5% to its annual earnings-per-share growth rate over the next five years, boosting the total to 25% annualized. That drives Brookfield's view that its stock will be worth at least $140 a share by 2030.
A wealth-creating machine
Brookfield Corporation has a long history of growing shareholder value. It has delivered a 19% annualized total return over the last three decades, crushing the S&P 500's 11% annualized return. It's in a strong position to deliver similar, if not better, returns over the next five-plus years. That high return potential, driven by its exposure to so many of my highest-conviction investment themes, is why I'd buy Brookfield's stock if it were the only one I could invest in right now.
