Author Topic: BAM - Brookfield Asset Management  (Read 510048 times)

John Hjorth

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Re: BAM - Brookfield Asset Management
« Reply #240 on: October 25, 2017, 11:27:34 AM »
I bought a bit today, to get started. That actually feels good in my stomach.

Basically, and at least to me, it's all explained in the post by Al [Uccmal] earlier today in this topic. [When I grow up, I hope to be able to do posts like Al here on CoBF, short, comprehensive & cut to the bone].

It's all about the understanding of the franchise - as it is right now - and its prospects going forward.

You can go on a wild goose chase - like I have within the last few days, and likely you'll just end up confused without any conviction [like I did].

We sit as investors and look at this enormous balance sheet and this quite complicated capital structure.

The most important asset: The economic value of the client base - by BAM doing its thing - it absolutely nowhere to see in the balance sheet. That is also what makes this thing GARPy [ref. earlier post in this topic by Joel [racemize]].

The economic value of the franchise/the client base is booked at zero value, because it's built up internally [not bought] - over many ears. All the costs related to building it up have historically been expensed in the year the cost were spent. Think tons of hours related to meetings, travel expenses, preparations before meetings, representative costs and so on. No actual client to charge, but costs spent to get a new client in the stable.

I think I read somewhere - again, poor documentation for my part - that the client base was 450 clients - most likely all with deep pockets, and most likely quite some of them with really, really deep pockets, their clients again asking/demanding for a return on capital.

And BAM has already proved its ability to scale up their business materially, during the last years.

- - - o 0 o - - -

This is also just another way to phrase the guidance I've got from cubsfan earlier in this topic. Again, thank you.
« Last Edit: October 25, 2017, 01:12:57 PM by John Hjorth »
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walkie518

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Re: BAM - Brookfield Asset Management
« Reply #241 on: October 25, 2017, 03:11:35 PM »
Have owned shares for a couple of years now on the basis that they have a wonderful platform with fabulous client retention. 

The one part with which I struggle is how the company values its real assets. 

In theory, BAM should mark everything to market.  In practice, BAM might be marking to cost.  This means that some properties are vastly understated while others might be somewhat overstated. 

Where this argument might break down is how much the portfolio has appreciated over time, how Flatt et al. are true bad news buyers, and how well the market has perceived the underlying value of the stock?

John Hjorth

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Re: BAM - Brookfield Asset Management
« Reply #242 on: October 25, 2017, 04:56:01 PM »
walkie518,

Stated with all due respect for you, you have to distinguish between market value and fair value for the assets of BAM, according to IFRS. They are certainly not the same - for some certain BAM assets, market value - in the short run - does not even have some kind of concept.

The ability to hold on to the asset through thick and thin is absolutely crucial, though.

There are some posts by fellow board member WhoIsWarren in this topic covering it.
ĒIn the race of excellence Ö there is no finish line.Ē
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walkie518

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Re: BAM - Brookfield Asset Management
« Reply #243 on: October 25, 2017, 05:34:33 PM »
By that logic, one trusts management to be honest and fair with the accounting.

According to GAAP, when the price of oil goes down, Exxon has to mark an impairment of underground reserves. 

According to IFRS, when the price of a real asset goes down, Brookfield can opt not to disclose.  This isn't comforting if I am correct. 

Again, I own shares and think they're doing a terrific job, but I'm not sure how to reconcile? 

Uccmal

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Re: BAM - Brookfield Asset Management
« Reply #244 on: October 25, 2017, 06:08:16 PM »
I like BAM. A a lot. Big fan of Flatt & Co. But, I think it's fully valued here in the low 50's. For anyone buying at these levels - there's no margin of safety - or am I out to lunch on the fair value of BAM? What do you think it's worth?

Funny, I discussed this with Racemize privately a few months ago.  We sort of concluded that you could buy it at 50 ish, or sit and hope that it gets cheaper.  I just bought it in and around 50 ish.  Sometimes it aint worth the trouble to earn a few extra points when the runway is so long.  In time paying 45 or 52 wont matter when the stock is in the hundreds.

I got BEP 25% cheaper a year, year and a half ago. 
GARP tending toward value

chrispy

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Re: BAM - Brookfield Asset Management
« Reply #245 on: October 26, 2017, 04:42:55 AM »
This board turned me onto BAM about a year ago and I held a small position until liquidating it to buy more FFH as I thought one was fairly valued and fairfax was not. 

Since then, I have read more of the earnings calls, all of the partnerships presentation and transcripts from last month.  I am slightly in awe of the whole operation and looking to build a substantial position to hold for a very long time.

BPY has been buying shares for the past year or two and state that they are undervalued.  They belive their retail holdings are not dead in the water although this is priced in.

Similar to what uccmal said, I plan to buy a good amount over the next year or so as the business is going to be worth more in several years.

Bruce Flatt follows this logic in his closing statement for the BAM presentation:

"
 I think what always gets under-estimated in any great business, and when we look at other businesses to buy, what always gets under-estimated, and every one out of four people does the exact same thing, including myself, is that you under-estimateóyou look at the business, you see what itís worth today, but you under-estimate the fact that if itís growing and itís a good business, itís going to be worth so much more in five, 10, 15, 20 years from today. I think the company has that capability and the franchise value is significant. It canít really be arithmetically calculated in Brianís calculations, but thatís really the value of what the franchise at Brookfield.
"

villainx

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Re: BAM - Brookfield Asset Management
« Reply #246 on: October 26, 2017, 07:16:03 AM »
For folks investing in the partnership, anyone does it via tax advantaged accounts?  I've read a lot of pros and cons regarding that. Any opinions? 

villainx

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Re: BAM - Brookfield Asset Management
« Reply #247 on: October 26, 2017, 07:52:47 AM »
I'll elaborate with regards to the partnership and pros and cons for different regular vs tax advantaged accounts.

Foreign tax issues

UBTI - though it might be minimal and partnerships actively seek to avoid it

K1 - never had an issue with this, but not sure how it effects tax advantage account.

Reduction of cost - I heard that if it's long term hold, is it return of capital might several reduce capital basis? Which would be a reason for inclusion in tax advantage account.

I might be missing something.



racemize

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Re: BAM - Brookfield Asset Management
« Reply #248 on: October 26, 2017, 07:58:45 AM »
I'll elaborate with regards to the partnership and pros and cons for different regular vs tax advantaged accounts.

Foreign tax issues

UBTI - though it might be minimal and partnerships actively seek to avoid it

K1 - never had an issue with this, but not sure how it effects tax advantage account.

Reduction of cost - I heard that if it's long term hold, is it return of capital might several reduce capital basis? Which would be a reason for inclusion in tax advantage account.

I might be missing something.

When do you get your K-1s?  I've always been paranoid they will come in late.

Jurgis

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Re: BAM - Brookfield Asset Management
« Reply #249 on: October 26, 2017, 08:02:02 AM »
I'll elaborate with regards to the partnership and pros and cons for different regular vs tax advantaged accounts.

Foreign tax issues

UBTI - though it might be minimal and partnerships actively seek to avoid it

K1 - never had an issue with this, but not sure how it effects tax advantage account.

Reduction of cost - I heard that if it's long term hold, is it return of capital might several reduce capital basis? Which would be a reason for inclusion in tax advantage account.

I might be missing something.

I think UBTI over $1K is the only issue in general for tax advantaged accounts ( https://www.investingdaily.com/18785/avoiding-taxes-on-your-ira ). So if it's minimal, it should be OK. I am not an expert though.

Foreign taxes is a cost if they are charged, but not as much pain as UBTI potentially.
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