Friday, August 19, 2011

Brookfield Asset Management 2

I do not own this stock (TSX-BAM.A). One thing pops out on the financials for this company for 2010 and that is that values look much better under the new accounting rules of IFRS. This is probably why this company switched to the new accounting rules before they needed too.

When I look at insider trading, I find $31.8M of insider selling by CEO, CFO and officers. They seem to be selling off stock options. There is minor $2M of insider buying by directors. Selling may seem high, but it is way less than 1% (at .2%) of the market cap of the company. One good thing to see is that insiders do have more shares than stock options.

I get a 5 year median low Price/Earnings Ratio of 12.54 and a 5 year median high P/E of 27.89. The Current one of 14.33 is better than the 5 year median P/E Ratio and therefore shows a better than median stock price.

I get a Graham price of $34.94 and the current stock price of $28.58 is some 22% lower. The 10 year low median difference between the Graham price and stock price is with the stock price 10% lower. By this measure, the current stock price is good. Both these measure use earnings estimates. The estimates are probably ok for 2011, but if we hit a recession, the 2012 estimates are probably much too high.

I get a 10 year median Price/Book Value Ratios of 1.89 and a current P/B Ratio of 1.05. The current ratio is only 55% of the 10 year median P/B Ratio and points to a good stock price. So by the measure of P/E, Graham Price and P/B Ratio, the stock price looks good. A P/B Ratio of 1.05 is a good one in absolute terms.

However, you get something different looking at the dividend yield. I get a current Dividend Yield of 1.81% and a 5 year median yield of 1.89%. By this measure the stock price is on the high side. And, a lot of people feel that the only measure of stock price for dividend paying stock is the dividend yield. The dividend yield has been lower in the past as the 10 year median low dividend yield is 1.66. The probably reason for the bad showing on dividend yield is lack of dividend increases since 2009.

When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy recommendation. Buy recommendations come with a 12 month stock price between $33 and $36. This stock would be considered to be at an average risk level.

One analyst thought the company had good long term prospects and was a lower-risk way to gain exposure to emerging markets. Another analyst feels that there Brookfield has a number of investment opportunities in the future. A number of analysts think the company has good management. I can see nothing pointing to a dividend increase in the future. At least there been no name changes since 2004.

At the moment, I am not interesting in buying this company, but will continue to follow it.

This Canadian Asset Managing company invests in and operates a variety of assets on its own behalf as well as co-investors. It is focused on property, power and infrastructure assets. It operates in Canada, US and internationally. The subsidiaries of the Company are Brookfield Homes Corporation, Brookfield Properties Corporation, BPO Properties Limited, Multiplex, Brookfield Power Inc., Great Lakes Hydro Income Fund, Brascan Brasil, S.A., Brascan Residential Properties, S.A. and Brookfield Investments Corporation. Partners Ltd owns 17%. Its web site is here Brookfield. See my spreadsheet at bam.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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