No. of Recommendations: 10
if you still like brookfield, then why not just closely monitor what flatt,marks,etc... are retaining?
(still ~90% BN as the underlying asset ? please correct if wrong.)
Far as I can tell, Flatt retains pretty much everything -- all the spinouts -- because he sort of has to as CEO. This public relations aspect of his job makes him a particularly bad investor to clone, even if one were into that sort of thing. For example, if he thought BBU was an inferior stand-alone investment, he couldn't say so. In fact, he received 112,201 shares of BBUC in that spinout last year, meaning he was holding about twice that much BBU.
This strategy does not add up to ~90% BN. In the recent hubbub over Flatt's relatively small sale of BAM and buy of BN (possibly leaked as yet another attempt to influence markets that BN is undervalued, a case he's been making for quite some time), the resulting balances were ~66 million shares of BN and ~15 million shares of BAM, which would make BAM more than 18% of just those two holdings. More to the point, it's roughly maintaining the proportions of the spin -- one share of BAM for every four shares of BN.
Besides, it's not always easy to keep up with what these guys are doing, which is part and parcel of the original complaint. For example, roughly 60% of the new BNRE shares authorized last week are already spoken for before everyday BN shareholders receive the offer. By whom? Is that Bruce and Co. or somebody else? Does Flatt have an offshore residence that would make BNRE more tax efficient for him than BN? Do company execs have some insight into the likely timeline for delinking BN and BNRE and what the likely values will be when they trade independently? I don't think it's overly cynical to conclude that all this complexity and opacity serve someone's interests, and it's not ours. (Flatt reported owning more than 1 million shares of BAMR, the original ticker for BNRE, more than a year ago.)
My complaint is not that I don't know what to own. For better or worse, I like making those calls myself and no longer have much internal debate when it comes to Brookfield. At Friday's close, my Brookfield stake consisted of 64.2% BN, 32.6% BAM and 3.2% BNRE. This differs from the proportions of the respective spins in part because of my obsessive-compulsive affection for round numbers and in part because I diversified my allocation to alt managers recently by selling off some BN. I don't think owning mostly BN means you don't have to pay attention to the shenanigans. That's the parent. That's where the shenanigans are coming from.
My complaint is about a corporate culture apparently obsessed with trying to outsmart Mr. Market by constant fiddling with an endless array of tickers, spinouts, spin-ins, exchanges, reverse exchanges, and organizational restructures. That brings echoes of the smartest guys in the room, and we know how that turned out.
