Brookfield Corporation (NYSE: BN) has long been one of my favorite companies. The global investment firm has an exceptional record of creating value for investors. Over the last 30 years, Brookfield has delivered an annualized total return of 19%. That has outpaced the S&P 500 and Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB), which have both delivered roughly 11% annualized returns.
I think Brookfield looks more like Berkshire Hathaway every year. Here’s what drives that view and whether now is the time to buy the financial stock.
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Taking a page out of Berkshire’s playbook
Brookfield has built a global investment firm around three platforms:
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Alternative investment management: Brookfield has a 73% interest in one of the world’s leading alternative asset management firms, Brookfield Asset Management.
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Wealth solutions: The company has built an insurance-focused wealth solutions platform from the ground up over the past several years.
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Operating businesses: Brookfield has a portfolio of operating businesses built around infrastructure (Brookfield Infrastructure), energy (Brookfield Renewable), private equity (Brookfield Business), and real estate (Brookfield Property).
Brookfield’s portfolio of operating companies reminds me a lot of Berkshire Hathaway. Like Berkshire, it invests in energy, railroads, and manufacturing and industrial assets. Brookfield has also started investing in insurance companies in recent years (largely focused on annuities). The company uses the earnings these businesses generate (and the insurance float) to invest capital in growing shareholder value. However, while Berkshire primarily invests its capital in new operating businesses and publicly traded stocks (e.g., Coca-Cola and Apple), Brookfield predominantly invests in its private funds and commercial real estate.
A compounding machine on steroids
Brookfield Corporation has grown its distributable earnings from $2.7 billion in 2021 to $5.3 billion last year, a robust 22% compound annual growth rate over the last five years. The biggest driver has been the addition of its wealth solutions platform, which has been a significant growth catalyst over the last three years.
The company believes the next five years could be even better. A major catalyst is its strategic focus on AI infrastructure investment. The company sees a once-in-a-generation opportunity to invest in building the backbone infrastructure to support AI. One way it’s doing that is by investing in AI factories (specialized AI data centers). Brookfield is a cornerstone investor in the Brookfield Artificial Intelligence Infrastructure Fund (managed by Brookfield Asset Management), which aims to invest up to $100 billion in AI infrastructure assets. Additionally, many of Brookfield’s operating businesses are investing in supporting the digitalization trend (Brookfield Infrastructure is investing in semiconductors and data centers, while Brookfield Renewable is investing in expanding power generation capacity).
