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Brookfield Asset Management Inc. Message Board

  • besterman2006 besterman2006 Mar 26, 2012 1:01 PM Flag

    Long term return data in annual report

    They don't give much info on this number except that it was 20% over 10 years and 16% over 20 years.

    Does anybody know if this statistic is with dividend reinvested and included or just share price appreciation? Also I assume this is market price per share and not book value increase per share.

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    • Well, imo ... management talks a good game but is way overrated. Wall Street has this figured out ... that's why the stock doesn't move.

    • That table in the annual report is probably based on stock price. Just eyeballing it, it looks like the change in stock price including dividends.

      The stock has been a very good long term performer despite some rough times recently. It has been dead money for 5 years but an outperformer for most periods besides that, long term better (depending on the time period) than BRKA, LUK, and other famous wealth creation companies.

      The "total return" they have been touting recently includes IFRS accounting adjustments, and there are some pretty big mark-ups of asset values, look in the 2011 supplemental pages 15-17 for example which reconcile earnings and total return. I am a little skeptical of this, but this is how their book value is calculated -- management's estimates of cap rates, valuations, etc. factor into the value of most of their assets. This is what IFRS is about.

      One view on this is that this values the assets using optimistic assumptions that might not apply during all market cycles. Another view is that if you look at their actual transactions and the price they fetch when they sell their assets, they are in line with those estimates. If they were forced to, say, liquidate NYC real estate during the downturn, they wouldn't fetch those prices. But they weren't, and they have never been a forced seller, even during the deepest depths of the downturn. So you could say that the values are either optimistic or realistic depending on your view.

      It was actually amazing to watch how well they held up during the downturn -- financed with so much debt, holding real assets that were deflating and tied to the broad global economy, headed into a financial hurricane. But it was largely a non-event, I guess because they tend to have 10-20 year contracts in place (i.e. long term leases, long term power sale agreements, etc) that were not interrupted by the meltdown. They learned this lesson in previous downturns.

      The current value of ~$41/sh for the NAV is a little optimistic in my opinion but not way off base. I made great money on this stock buying it at about 65% of then-NAV in the early 2000's. They're also well positioned for inflation.

      • 1 Reply to randy_foo
      • I would think the AR chart is the most pragmatic measure of realized value, after all stock price + dividends is what the shareholder can "take out" over time.

        Looking at the 20 year, 16% is amazing!
        Although I find this line a mix of mixed irony: "respectively, compare
        favourably to most other investments, and we see no reason why we should not be able to
        continue to compound our long-term returns at these attractive levels in the future."

        I would feel much better if they said, like Buffet, "we are UNLIKELY to continue this performance going forward!"

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