Many investors still don’t know about Brookfield (BN 1.08%), a company headquartered in Canada. But if you want to add a high-potential stock to your portfolio in 2025, keep reading.
With more than $900 billion in assets under management, Brookfield is one of the largest alternative asset managers in the world. Once you learn about all the niche investment funds it operates, you’ll be truly amazed. Few asset managers are positioned as well as Brookfield. Better yet, its management team aims to produce annual returns of 15% or more — a goal the company has done an exceptional job at realizing for decades.
Think Brookfield might be a fit for your portfolio? Let’s cover a few additional considerations before you make the leap.
Brookfield has achieved incredible historical success
I’ve been following Brookfield for a number of years. At the start, I was skeptical of the company’s target of achieving annual returns of 15% or more. Yet that’s exactly what it has done. Over the past 30 years, Brookfield’s stock has delivered 18% annual total returns, heftily outperforming most market indexes, and even legendary conglomerates like Berkshire Hathaway.
What makes this outperformance possible? The secret lies at the heart of Brookfield’s co-investment model.
In contrast to most money managers, Brookfield invests heavily alongside its clients. Like Berkshire, it owns a portfolio of insurance companies that provide it with “float.” Float is essentially unencumbered cash generated by holding premium payments until they must be paid out as claims. As of last quarter, Brookfield had more than $110 billion in float, providing it with a low-cost form of capital it can use to invest in new projects.
In addition, the company has $155 billion of its own capital that can be continually deployed. When an investment opportunity matures, Brookfield can recycle this capital into additional opportunities. And of course, as an asset manager, it co-invests client money, which last quarter totaled roughly $1 trillion.
With Brookfield, there are multiple ways to win. You get the interest rate arbitrage of investing insurance float in higher-returning investments, the direct profits generated by investing its own capital, and asset management fees accrued by investing client funds.
Where exactly is Brookfield investing all of this combined capital? Into opportunities that it sees having multidecade runways of growth. That includes a wide variety of sectors — everything from renewable energy and global infrastructure projects to distressed real estate and private equity. It really is a “go anywhere” model, focusing on sectors that take patience and industry know-how to generate consistent double-digit returns on investment.
Image source: Brookfield investor presentation.
Is this high-quality stock still a buy in 2025?
Like many stocks, Brookfield had an incredible 2024, with shares rising by more than 40%. And make no mistake: The stock is more expensive than in the past, with shares currently trading at nearly 2 times book value versus its 10-year average of 1.4 times book value. But as its history has proven, Brookfield isn’t a great choice for short-term investors. Like Berkshire, this is a business model focused on multidecade returns, with a focus on investment classes that have a bright future through the rest of the decade.
From this perspective, it’s likely OK to overpay for what has proven to be a consistent long-term winner. Need more proof? At no time in Brookfield’s history has the stock not been a buy if you’ve been willing to hold on for the long term. You could have easily lost money by overpaying in the short term, and selling shares months or even a few years later. But multidecade holders of this stock have generated impressive long-term results, no matter what their historical purchase price was.
Where will Brookfield’s stock head in 2025? No one knows for sure. But if you’re invested not only for 2025, but also 2035, 2045, and beyond, Brookfield remains a blue chip choice.
Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Brookfield, and Brookfield Corporation. The Motley Fool has a disclosure policy.
