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. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  3. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  6. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  7. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  9. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  10. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!