Large asset management companies can be tricky companies to monitor and evaluate. Oftentimes, success is predicated more on identifying top managers like Henry Kravis and George Roberts at Kohlberg Kravis Roberts (NYSE:KKR) or Warren Buffett at Berkshire Hathaway (NYSE:BRK.A, BRK.B) and letting them do their thing - trusting that superior management and investment identification will produce and accumulate value over time.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

It's a similar situation for Brookfield Asset Management (NYSE:BAM) - while the fact that the company has multiple publicly-traded entities makes analysis a little simpler, the reality is that this too is largely a bet on the ability to management to continue to find attractive investment options.

Quality Results Largely Irrelevant
Although BAM does report results on a quarterly basis, this really isn't a quarter-to-quarter story for most investors (and both institutional ownership and short interest are fairly low relative to its market cap). As is the case for Berkshire Hathaway, Carlyle Group (NYSE:CG), and many similar firms, it's about the long-term value added through the companies' investment decisions.

For the quarter ended March 31, total return increased 67% to $711 million, net income for shareholders increased almost 50% to $416 million, and per-share funds from operation rose 21% to 40 cents.

But what does that really tell an investor? The improved results from the company's commercial property are good news, as are improving lease rates. On the other hand, operating assets like timberlands, power generation and toll roads don't really show their value on a quarterly basis.

Alphabet Soup
Unlike many asset management companies that operate like opaque black boxes, Brookfield has numerous publicly traded entities. Brookfield Infrastructure Partners (NYSE:BIP), Brookfield Canada Office Properties (Nasdaq:BOXC), Brookfield Renewable Energy Partners (OTCBB:BRPFF), Brookfield Residential Properties (NYSE:BRP), Brookfield Properties (NYSE:BPO) and General Growth Properties (NYSE:GGP) all give investors more focused plays on BAM's various investment areas and quite a bit of detail about their operations.

As time goes on, I would expect this trend to continue - making BAM more of an investment option for those who want a stake in everything and the private equity investments (which include residential property development, "special situations," and ag development). In other words, investors who really want exposure to "infrastructure" assets like timber or petroleum transportation can go with BIP, investors who want exposure to Canadian real estate can go with BOXC and investors wanting a generalist high-quality asset management can still buy BAM shares.

SEE: How To Invest In Private Equity

The Bottom Line
Evaluating and valuing BAM is frankly a pain for most investors. Valuing such things as the company's real estate portfolio and timber assets generally comes down to Net Asset Value (NAV) modeling and analysis, which is quite difficult for individual investors to do on their own due to the lack of readily available free information out there.

Likewise, assessing the company's long-term performance takes some unconventional analysis. The structure of BAM means that return on invested capital and free cash flow does not work especially well, leaving investors to rely on metrics like long-term book value growth and other internal metrics provided by the company.

BAM actually scores pretty well in terms of internal total return growth, book value growth, and stock market returns over the long term, though the company's performance over the past five years has been less impressive. Bought well, I believe this stock can outperform for the long term and roughly 1.2 times book value seems like a decent, albeit unspectacular, entry point for long-term investors.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Stephen D. Simpson did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  3. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  4. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  5. Stock Analysis

    Tech Stocks Vs. Financial Stocks in 2016

    Consider the arguments for allocating more of your investment portfolio to either the technology sector or the financial sector for 2016.
  6. Stock Analysis

    The Top 5 Financial Penny Stocks for 2016 (CPSS, ASRV)

    Learn about some of the most promising penny stocks in the financial services sector that investors can consider adding to their portfolio for 2016.
  7. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  8. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  9. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
  10. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
RELATED FAQS
  1. How can insurance companies find out about DUIs and DWIs?

    An insurance company can find out about driving under the influence (DUI) or driving while intoxicated (DWI) charges against ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center