If You're Looking to Amass Wealth: Discover the Leading Stock with a Strategy to Enrich Its Investors for the Next 5 Years and Beyond.
Top-tier businesses consistently yield superior total returns year after year. For instance, Walmart and Berkshire Hathaway have annualized returns of 12% and 13% respectively, over the past 30 years, surpassing the 11% of the S&P 500. Amazon, on the other hand, has delivered an 18% return annually during the past 25 years, outpacing the S&P 500's 8%.
However, these impressive returns pale in comparison to Brookfield Corporation ('BN' -1.16%). This lesser-known entity has provided an 18% annualized total return over the past 30 years, and 19% over the past 25.
Brookfield Corporation anticipates better times ahead for its investors. Let's delve deeper into its strategy to make its investors significantly wealthier within the next 5 years and beyond.
A straightforward approach
Brookfield Corporation aims to generate returns exceeding 15% in the long term for its investors. The company is more optimistic than ever about achieving this goal. Its strategy to grow its investors' wealth over the long term is straightforward:
- Immerse in strong businesses.
- Manage the businesses effectively.
- Utilize excess free cash flow smartly.
- Foster unity around long-term objectives.
- Adapt to the evolving world.
Brookfield Corporation shares some resemblances with Berkshire Hathaway. Similar to Warren Buffett's company, Brookfield boasts insurance operations and acquires operating businesses it controls. It's on the lookout for high-quality businesses with the potential to grow earnings. It opts for businesses with robust earnings and recurring cash flows, such as those in the infrastructure, real estate, and renewable energy sectors.
While Buffett seeks to acquire excellent companies at a reasonable price, Brookfield usually pursues companies in need of operational enhancement. It adopts a private equity mindset, focusing on cutting costs to enhance the efficiency of the business.
The company then channels the growing excess cash flows its operating businesses produce towards reinvesting back into its operations and acquiring new enterprises. It also invests in the funds managed by its alternative asset management affiliate, Brookfield Asset Management. Brookfield typically reinvests 75% of its annual free cash flow to create value for shareholders. It returns the remaining cash through dividends and share repurchases.
Brookfield also endeavors to align everyone in the organization around its long-term objectives. It encourages teams to focus on clear goals, promotes from within, and aligns long-term compensation.
Finally, the company strives to evolve with the world around it. For example, it has launched listed entities, such as Brookfield Renewable, Brookfield Infrastructure, and Brookfield Business. It has also expanded its asset classes as the global economy has evolved, adding new platforms like data infrastructure, nuclear, and logistics.
Summing up the worth
Brookfield Corporation estimates it can increase its cash flow per share at a rate of more than 20% annually over the next 5 years. This implies the company will generate around $47 billion of cumulative free cash flow over the next 5 years, or approximately $30 per share. This provides the company with ample funds to allocate wisely.
The company conservatively values its business at around $84 per share today, well below the current share price of around $55. It anticipates its ability to allocate capital wisely should deliver annualized returns on invested capital of 16%. This should boost the intrinsic value of the shares to $176 by 2029. Considering the current disparity between the share price and the underlying value of the company, the total return potential is even higher at 29% annually.
In another perspective, Brookfield Corporation could turn a $5,500 investment made today into around $17,600 in about five years, assuming the share price aligns with the company's estimated value. This presents a strong return potential from a company with a rich history of enhancing shareholder value.
Investing in Brookfield Corporation could potentially yield annualized returns of 16% over the next 5 years, as estimated by the company. This strategy of investing in Brookfield Corporation might significantly increase an initial investment of $5,500 to around $17,600 within five years.
Brookfield Corporation's finance strategy involves focusing on robust businesses, managing them effectively, and reinvesting a significant portion of its free cash flow back into its operations and new acquisitions, much like Berkshire Hathaway. This strategic approach has the potential to generate returns exceeding 15% in the long term for its investors.
