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Newcomer Investor

@NewcomerInvest

Jan 6

Fairfax $FFH is one of North America’s best kept secrets.

It’s been one of the best performing stocks since its IPO in 1985.

And it’s STILL SUPER CHEAP!

Read this thread to understand why we call it Canada’s Berkshire! $BRK.B 🧵⬇️

Fairfax’ Guiding Principles.

Prem Watsa (founder) credits his investing strategy to Ben Graham’s teachings on Value Investing. He’s such a fan, he named his son Ben!

He was an early fan of Warren Buffett as well and attended his Omaha meetings as far back as the 80s!

Their LONG-TERM track record has been absolutely phenomenal.

Who would have thought an insurance and investment company would be part of such an elite group of companies?!

Read 18 tweets

Newcomer Investor

@NewcomerInvest

Dec 26, 2024

Bull Thesis on Brookfield Corporation $BN, based on Bill Ackman’s recent comments (summarized by Grok)

🔸 Dominant Asset Management: BN's 73% ownership in Brookfield Asset Management $BAM , one of the world's top alternative asset managers, forms the backbone of BN's value proposition, with BAM's expertise in high-growth sectors like infrastructure, renewable energy, and AI.

🔸 High-Quality Revenue Streams: BAM generates stable, high-margin fee revenues from managing $540 billion in capital, with projections to scale to $1 trillion AUM by 2028, driving significant earnings growth.

🔸 Megatrend Alignment: BN is strategically positioned to capitalize on global trends like decarbonization, digitization, and de-globalization, making it a key player in future economic shifts.

🔸 Carried Interest Potential: BN has a substantial claim on BAM's carried interest, expected to increase dramatically from $450 million to $2.5 billion annually, providing a significant boost to BN's cash flows.

🔸 Growth in Wealth Solutions: The rapidly expanding wealth and retirement solutions business, managing $115 billion, is set to double its earnings, leveraging BN's asset management capabilities for high-margin returns.

🔸 Diverse Cash Flows: Beyond BAM, BN benefits from dividends and cash flows from other subsidiaries, real estate, and insurance float capital, ensuring a diversified and growing income stream.

🔸 Undervalued by Market: BN currently trades at a low multiple of earnings, suggesting a significant upside as its diverse cash flow streams are realized and better understood by the market.

🔸 Future Cash Flow Explosion: With cash flows expected to exceed $10 billion by 2028, BN has the potential for substantial capital allocation back into the business or shareholder returns through buybacks.

🔸 Conservative Valuation: Even with conservative valuation multiples, BN's sum-of-the-parts analysis indicates the stock could more than double, especially when compared to peers like KKR and Apollo.

🔸 Market Inefficiency: Lack of S&P 500 inclusion currently undervalues BN, but with plans to relocate BAM to the US, this could unlock significant value through index fund investments.

🔸 Management's Strategic Moves: BN's management is actively working to close valuation gaps by improving visibility, coverage, and investor awareness, suggesting confidence in the company's intrinsic value.

🔸 Historical Performance: BN has already seen a 40% increase in stock price since Ackman’s investment position was built, yet it remains undervalued, pointing to strong future returns.

🔸 Defensive and Growth Characteristics: BN combines stable, asset-backed income with growth in alternative investments, offering both safety and growth potential in one investment.

🔸 Institutional Overlook: There's an opportunity for institutional investors to realize the value disconnect, further amplified by BN's steps to increase its profile and market recognition.

🔸 Long-term Investment Horizon: With a clear path to earnings and cash flow growth, BN represents a compelling long-term investment in a conglomerate with multiple high-growth levers.

This was the clip:

“And then the corporation, which I'll refer to as both Brookfield and/or BN, I'll use those phrases kind of interchangeably. It's really -- it's the parent entity that sits atop of kind of a broader ecosystem of various publicly traded affiliates. When you think of Brookfield, the parent BN, it generates cash flows from controlling ownership it has in a handful of these interrelated subsidiaries in various cash flow -- contractual cash flow streams. But starting with the most principal asset that they own, which we believe comprises the vast majority of BN's value, it comes from their 73% ownership they maintain in their publicly traded asset manager, called Brookfield Asset Management known as BAM.
So BAM is one of the world's preeminent alternative asset managers. And they derive a significant portion of their value from asset-light recurring management fee streams on $540 billion of long-duration internal and external capital that they manage. And BAM's success stems from deep investment expertise and a best-in-class track record in the areas of infrastructure, power, renewable energy, real estate, and credit. They actually -- they own Oaktree as well.
And taking a step back, when you think about BAM and the Megatrends that are both propelling both BAM and BN, the parent, it's an investment focus that they have around three key themes which include decarbonization, digitization, and de-globalization and increasingly Brookfield, they find themselves at the center of accelerating investments in clean energy and transition, critical infrastructure and most recently artificial intelligence.
Also, Bill mentioned earlier some of the optimism we have around the new administration, I think that many of these verticals are poised to see accelerated investment in growth over the coming years. And again, Brookfield is very well positioned to benefit from that we believe.
Focusing on BAM specifically, they generate fee revenue, which is this very high margin revenue stream and what they call fee earnings, which is the term that all the asset managers use. And we think BAM's fee earnings will nearly double through 2028 as they rapidly scale their fee-paying AUM to approximately $1 trillion, driving higher revenues which with strong operating leverage, will drive significant earnings growth.
And notably, when we think of BAM, I'd say it has all the attributes of what we say is kind of a classic Pershing Square investment. It's simple, predictable, high quality, and a rapidly growing capital-light business. And simply put, it's Brookfield's crown jewel. Now intelligently, Brookfield spun out a 25% minority interest in BAM at the end of 2022.
And that's why it's publicly traded today and has its own kind of listed security. And the purpose here was to highlight the value that they saw in that business. Now the market has agreed with them. And so in recognition of all of the above, the market is currently valuing BAM at 33 times earnings, which is a $66 billion asset at BN's 73% proportionate ownership worth roughly $41 a share in value to BN.
Now, beyond BAM, putting that aside for a second, as I mentioned, they own controlling interest in various affiliated entities and cash flow streams including, one, a preferred claim on BAM's carried interest, which I'll talk about in a minute, two, they receive dividends from $18 billion of equity ownership, BN maintains in a number of their publicly listed affiliate companies.
These are tickers like BIP and BEP. They're actually fairly analogous to PSH in that they're externally managed kind of perpetual capital vehicles and provide a very -- they're more kind of yielding securities and so BN gets this dividend stream from them, three, they have cash flows from $11 billion that BN has invested in BAM's long-term funds which creates alignment of interest between BN and the limited partners in BAM's funds.”,

Part2: “
“four, they have a $24 billion real estate business which they own on balance sheet; and then five, they have this rapidly growing wealth and retirement solutions business.
So in aggregate, we think these cash flow streams are poised to grow very rapidly over the coming years with accelerated growth from two in particular which I'll touch on. So first is the carried interest piece. So BN, when they spun out BAM retained a disproportionate share of the right to carried interest that BAM has on their long-term funds including 100% of carried interest from all funds which existed prior to 2023 and one-third claim on carried interest on all BAM funds thereafter.
But today BN, the parent is generating minimal carried interest, approximately $450 million. This is poised to grow very rapidly over the next few years as select vintages of BAM's flagship funds enter key monetization windows. So, management has guided to $11 billion of cash flows over the next five years and $25 billion of cash flows over the next 10 years.
We anticipate carry will stabilize in the $2.5 billion range within the next couple years, so more than a 5x multiple of the current cash flows. And we think this asset is getting little to no credit at BN's current valuation with most investors taking a wait-and-see approach.
Second, Brookfield has assembled a leading retirement and wealth solutions business which today manages approximately $115 billion of insurance float capital. And this business is focused on issuing long duration low-risk annuities which pair exceptionally well with Brookfield's asset composition which is focused on these real assets like infrastructure assets that I mentioned previously.
The business is highly synergistic for the Brookfield ecosystem as BAM is the manager which invests the float on behalf of policyholders, which generates a capital-light and high-margin management fee stream for BAM, while BN generates earnings on the realized asset yield above the cost of insurance.
This is referred to as spread earnings in the industry. Brookfield Wealth Solutions, this business is today generating $1.3 billion of earnings, but they have near term line of sight to $2 billion on a path to more than $3 billion over the coming years. And the business we note features very strong parallels to Apollo and KKR's highly successful similar strategies they've employed with Athene and Global Atlantic respectively.
Turning to valuation, so notwithstanding broad market appreciation for BAM as a very high-quality business which I mentioned earlier, BN, the parent is today trading at roughly 15 times our assessment of earnings, which we view as a very low multiple in the context of a recurring cash flow stream that we estimate will more than double through 2028 to $10 billion plus, which is a 20% compounded growth rate.
And again growth will be driven by the scaling of this wealth solutions business, a step function change in the contribution from carried interest, attractive teens plus growth in BAM's fee earnings and stable mid-single-digit growth across their other holdings. This rapid growth in earnings will also generate significant excess cash flows with we estimate approximately $25 billion of cash which Brookfield can use for buybacks or other intelligent capital allocation, which is nearly 30% of BN's current market capitalization.
And when we look at the composition of Brookfield's 2028 cash flows, applying a mid-teens multiple weighted average multiple sum of the parts multiple, we anticipate shares are poised to more than double over the coming years. Now, I would also say that comparison however to publicly traded peers such as Blackstone, but more significantly KKR and Apollo would imply very significant valuation upside relative to what I just mentioned and as an observation.
Bill Ackman
Where does Apollo and KKR trade?
Charles Korn
So today KKR and Apollo are trading at 27 times and 22 times earnings. “

Read 5 tweets

Newcomer Investor

@NewcomerInvest

Nov 22, 2024

KITS is the best small cap company you’ve never heard of.

In just a few years, they scaled from $0 to $150M+ in annual revenue run rate.

In this mega thread, I’ll explain why I recently made this one of my LARGEST holdings! 🧵 ⬇️

$KITS

WHAT IS KITS?

In their own words: KITS is a rapidly growing, digital eyecare platform providing eyewear for eyes everywhere.

Based in British Columbia, they offer a huge selection of contact lenses and glasses at very cheap prices!

How do they do it?

They built a cutting-edge optical lab in Western Canada, and essentially removed all the intermediaries (that’s where the crazy glasses costs usually come from). They’re now able to manufacture at scale, for extremely low costs, and they pass on those savings straight to customers.

MY EXPERIENCE

I thought it was too good to be true, so I made an account. Shortly after, they ran a promotion and emailed me a code: get your first pair free! (Pay only shipping.)

For $8, I got a high quality pair - perfect fit, they got the prescription right, everything great. Couldn’t believe it!!!!

Let’s dive into some history now ⬇️

Read 22 tweets

Newcomer Investor

@NewcomerInvest

Nov 15, 2024

Today was Brookfield Day.

Here’s what you need to know about Q3 2024 earnings for Brookfield Corporation!

(🧵👇🏽)

$BN $BAM

https://twitter.com/newcomerinvest/status/1850612764869538177

Before analyzing earnings, we need to understand what IS Brookfield exactly?

I did a short recap video - highly recommend watching before diving into the rest. Find it right here 👇🏽

https://twitter.com/newcomerinvest/status/1850612764869538177

Now that we remember, let’s look at how to evaluate Brookfield.

This page is near the beginning of their Supplemental Info package each quarter and does a good job of explaining how each piece ties into Brookfield’s broader performance.

Read 15 tweets

Newcomer Investor

@NewcomerInvest

Nov 3, 2024

Should you BUY Alimentation Couche-Tard? $ATD

In this megathread I’ll explain why it’s one of my top holdings! 🧵⬇️

HISTORY

Alimentation Couche-Tard, a global convenience store business, was founded by Alain Bouchard in 1980, and he led the company as its CEO all up until 2014. (He’s now still involved)

Starting with one convenience store, he steadily grew by acquiring more and more stores, improving their operations, rinse and repeat.

KEY NUMBERS - THE STOCK

$ATD is a very large business:

> #15 in Canada by market cap ( $69B )

> #1 in Canada in retail (bigger than Loblaws, Dollarama, Metro)

> 15,778% stock return since 1999, not including dividends

> over 26 million shares repurchased in fiscal 2024 - $1.4B worth

> 25.5% dividend increase for fiscal 2024 to 17.5c - resulting in a comfortable 24.8% payout ratio for the year

They have a history of compounding and have been one of Canada’s best performing stocks over the last 25 years!

Read 20 tweets

Newcomer Investor

@NewcomerInvest

Oct 27, 2024

Bruce Flatt has run Brookfield for 22 years.

He build it into a world class business with $1 Trillion in AUM.

Every quarter, he shares a letter with his insights. I’ve compiled some of my favourite moments below: 🧵👇🏽

(Bookmark & come back later. Worth it!)

$BN $BAM

On share buybacks. Q2 2024.

“For the ability to get $800M in liquidity, the selling shareholders turner over $1.68 Billion of Value to the remaining shareholders. […] That is a lot of Value added for not a lot of work.”

$BN $BAM

On Oaktree. Q3 2019.

In 2019, Brookfield acquired Oaktree, the world’s most pre-eminent distressed debt investor, to “prepare for the inevitable downturn in the markets”

The lesson here is having the foresight that markets don’t always go up, and being ready for it.

Brookfield didn’t predict COVID, but they knew they had to make moves to keep building an all-weather business. And they did.

$BN $BAM

Read 14 tweets

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