What stocks would you own if you had to hold only one stock for the rest of your life?
For most of us, that’s not the easiest question to answer, nor is it the most important. Diversification is a staple of modern portfolio management, and for good reason: the more you diversify, the less risk you take on.
Nevertheless, asking yourself which stocks you would own if you could only own one is a great way to sharpen your analytical skills. In this article, I share the one stock I would own if I could only own one.
Brookfield
Brookfield Corp (TSX:BN) is the stock I would own if I could only own one. It is a Canadian financial services company involved in almost all financial subsectors. Since being acquired by CEO Bruce Flatt in 2002, Brookfield has easily outperformed both the US and Canadian markets, returning approximately 16% annually. The company aims to continue to achieve similar returns in the future.
A great asset
This week, Brookfield made headlines when it announced it had completed its acquisition of Oaktree, a distressed credit firm in which it had been building a position since 2018. Before the announcement, Brookfield owned approximately 62% of Oaktree. The full acquisition will give Brookfield the ability to control Oaktree’s operating decisions, a privilege Brookfield waived as part of its previous partially proprietary investment.
Thanks to the recent acquisition of Oaktree, Brookfield now owns the world’s largest and most prestigious credit company. That will certainly improve Brookfield’s own prestige and ability to get a shot at Wall Street’s most exclusive deals.
Offers galore
Speaking of deals, Brookfield has been doing a lot of them lately. Last July, Brookfield Renewable Partners (TSX:BEP.UN)(TSX:BEPC) announced it had closed a deal to supply $3 billion in power to Alphabet. A year earlier, Brookfield Renewable signed a similar deal to provide 10 gigawatts of renewable energy Microsoft. Brookfield Corporation owns 48% of Brookfield Renewable Partners. So these deals will add value to Brookfield itself, and not just its partners.
Performance
Over the years, Brookfield has performed quite well in the markets, with a growth rate of around 16% per year. The business itself has also grown, with distributable profits (DE) increasing by 13% in the most recent reporting period. The company is quite profitable using DE as a benchmark, with a DE margin of 7% in the most recent quarter.
Valuation
Brookfield Corp is a cheap stock by some metrics, trading at 1.35 times sales and 15 times distributable earnings. Historically, the stock has traded at a large discount to its intrinsic value (i.e., shareholders’ equity, but calculated using market values ​​rather than book values). Due to Brookfield’s continued rally, which has seen the stock rise more than 100% from its 2023 low, that discount is no longer as large as it used to be. Nevertheless, BN shares are still trading slightly below the market value of their assets, net of debt.
Silly takeaway
Brookfield Corp is growing, profitable and well managed. Despite this, by some statistics it is still cheap. Brookfield is trading at a discount to intrinsic value and looks like a bargain. For this reason, these are the stocks I would own if I could only own one.
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