Does Brookfield Business Partners (BBU) Have the Potential to Increase its Net Asset Value?
Emeth Value Capital, an investment Management Company, released its second-quarter investor letter. A copy of the same can be downloaded here. Year-to-date, the fund returned 19.27% compared to the MSCI ACWI Index’s 14.19% return. Since inception, the fund returned 18.53%. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Emeth Value Capital highlighted stocks like Brookfield Business Partners L.P. (NYSE:BBU) in the second quarter 2023 investor letter. Headquartered in Hamilton, Bermuda, Brookfield Business Partners L.P. (NYSE:BBU) is a private equity firm. On October 5, 2023, Brookfield Business Partners L.P. (NYSE:BBU) stock closed at $14.83 per share. One-month return of Brookfield Business Partners L.P. (NYSE:BBU) was -5.12%, and its shares lost 23.40% of their value over the last 52 weeks. Brookfield Business Partners L.P. (NYSE:BBU) has a market capitalization of $1.113 billion.
Emeth Value Capital made the following comment about Brookfield Business Partners L.P. (NYSE:BBU) in its Q2 2023 investor letter:
"Brookfield Corporation has $5.5 billion invested through Brookfield Business Partners L.P. (NYSE:BBU), a publicly traded permanent capital vehicle that invests in industrials and business services companies. The group spun off from Brookfield in 2016 and was seeded with sixteen existing private equity investments across industrials, construction, oil and gas, and business services. Notable holdings included GrafTech, the leading producer of graphite electrodes, and Multiplex, a prominent Australian construction company. The portfolio value at inception was $2.5 billion, and Brookfield retained seventy-eight percent ownership. To date, under the leadership of Cyrus Madon, Brookfield Business Partners has realized $5.5 billion in proceeds while generating an average four times multiple on capital and thirty percent IRR across twelve concluded investments. In addition, the partnership has executed more than twenty new investments, totaling $8.0 billion in deployed capital, over the last seven years. What’s more, the quality of portfolio companies improved meaningfully over this time as proceeds were recycled from the sale of smaller, more cyclical businesses to fund the acquisition of larger businesses with increased scale, significant barriers to entry, and more resilient cash flows. For instance, the four largest companies within the current portfolio - Nielsen, Clarios, Sagen, and CDK Global - generate over ten times the cash flow of the four largest companies in 2016. However, what has remained unchanged over the years is Brookfield’s intense operational approach. At the outset of each investment, Brookfield crafts a detailed value creation plan, which, given the capital structure often employed in leveraged buyout transactions, has an outsized influence on shareholder outcomes. For example, over the last five years on an average equity capital base of less than $5.0 billion, Brookfield Business Partners has improved EBITDA at its underlying companies by $275 million. In other words, these improvements, which are often implementable regardless of the macro environment, added $2.75 billion in net asset value at a ten times multiple. Likewise, Brookfield has plans in motion across its portfolio companies to surface an additional $500 million in EBITDA over the coming years, which has the potential to significantly increase the existing $8.5 billion net asset value. Indeed, when coupled with natural deleveraging, these initiatives provide visibility to a base return of 1.7x - 2.0x, or approaching $11 billion for Brookfield Corporation’s share over the coming monetization cycle."
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Brookfield Business Partners L.P. (NYSE:BBU) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 1 hedge fund portfolios held Brookfield Business Partners L.P. (NYSE:BBU) at the end of second quarter which was 0 in the previous quarter. In addition, please check out our hedge fund investor letters Q2 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
