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. Mutual Funds & ETFs

    The 4 Best Buy-and-Hold ETFs

    Explore detailed analyses of the top buy-and-hold exchange traded funds, and learn about their characteristics, statistics and suitability.
  2. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  3. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  4. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  5. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  6. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  7. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  8. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  9. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  10. Investing News

    Could a Rate Hike Send Stocks Higher?

    A rate hike would certainly alter the investment scene, but would it be for the better or worse?
  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 >>

You May Also Like

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!