Subject: Sell BAM, buy BN?
ultimatespinach: At Friday's close, my Brookfield stake consisted of 64.2% BN, 32.6% BAM and 3.2% BNRE.

ultimatespinach,

Like Bruce Flatt did with some of his BAM holdings, why not sell some/all BAM and roll the proceeds into BN which seems to be the more attractive investment?

Using round numbers, BN distributable earnings are 5 billion annually. Current BN market cap is 50 billion which gives you an earnings yield of 5/50 = 10%. Management says distributable earnings are the primary performance metric and expected to grow 15% annually which gives you a total return of 25%.

BAM dividend yield is (0.32*4)/33.23 = 3.85% also expected to go up 15% annually for a total return of around 20% annually. With a 95% payout ratio, earnings yield is almost as the same as dividend yield for BAM.

Regardless of whether the expected increases actually occur, simply based on current earnings yield, BN is yielding 6% more than BAM. I am tempted to sell all by BAM and roll the proceeds into BN, but would like your opinion as a sanity check before I pull the trigger.

From a balance sheet perspective also, BN seems super cheap. If you attribute 40 billion of the 50 billion market cap to their 75% BAM ownership, you are getting everything else for just 10 billion. Everything else as in their direct investments into BAM funds, their stakes in BNRE, BEP, BIP and BBU. Plus BN will get 1/3 of carried interest from BAM in perpetuity even if they give up all ownership stake in BAM. All this for 10 billion seems ridiculously cheap.

BN is currently 35% lower than its all time high of 50.50 (adjusted for BAM spin-off) reached on 2/10/22. It's a 55% climb back to it's all time high which of course it's going to reach, we just don't know when. Even if it does that in 5 years, it's a pleasant 9% annual return.

Thank you for your excellent posts!