Brookfield Asset Management NYSE: BAM rallied to a new high Wednesday before retreating in Thursday’s session following the company’s second-quarter earnings report.
The stock closed at $56.55 Thursday, down $0.83, or 1.45%. It skidded 4.22% in the first hour of trade, before rallying to make up much of the early decline.
Despite the pullback, quarterly results were strong. The company earned $1.01 per share, topping views of $0.75 per share. Revenue was $18.286 billion. Those results were up 38% and 43%, respectively, from the year-ago quarter.
The quarter marked the first year-over-year revenue growth since the quarter ended in March 2020.
Brookfield, which specializes in alternative assets, has more than $625 billion under management. Rather than a traditional stock-and-bond manager, Brookfield’s assets fall under a range of categories, including real estate, infrastructure, renewable power, private equity and credit.
Some of the assets the company manages are publicly traded and liquid; others are not available via public markets. Its clients include both institutional and retail investors.
According to the company, “We earn asset management income for doing so and align our interests with our clients by investing alongside them.”
The company has about $59 billion of its own capital invested, primarily in its listed affiliates: Brookfield Property Partners, Brookfield Infrastructure Partners, Brookfield Renewable Partners and Brookfield Business Partners.
Growth In Various Business Segments
In Thursday’s earnings release, Brookfield CFO Nick Goodman addressed the strong results, saying, “Our business performed very well during the quarter, recording $1.2 billion of distributable earnings. Growth in our asset management franchise, steady returns on our principal investments and continued momentum on our capital recycling initiatives all contributed to the strong quarter.”
In the quarter, the company closed $9 billion in its fourth flagship real estate fund, as well as a $7 billion founders’ close for its Global Transition Fund, bringing total fundraising since the previous quarter to $24 billion.
“We expect the size of these two funds to exceed $30 billion before they close for capital,” Goodman said.
In the release, the company said, “Our distributable earnings continue to show strong growth, recording $1.2 billion for the quarter, and $6.3 billion
over the last twelve months, a 108% increase over the comparative period. The strong performance in the quarter is supported by a 49% increase in fee-related earnings, continued carried interest realizations, increased distributions from our principal investments, and disposition gains recognized on our principal investments.”
In other words, the company has several income streams from its various business lines that contributed to the bottom line.
Part Of Large-Cap Canada Index
Brookfield is a large cap, with a market capitalization of $85.39 billion. However, as it’s based in Canada, it’s not tracked in the S&P 500.
It’s part of the MSCI Canada Index, meaning it’s a component of the iShares MSCI Canada ETF NYSEARCA: EWC, where it comprises 3.76% of fund assets.
Following Thursday’s earnings report, Citigroup initiated coverage on the stock with a buy rating.
Brookfield is part of the investment management industry group, a sub-group within the broader financials sector. This sub-group has improved in performance in recent months. Industry standouts include Virtus Investment Partners NASDAQ: VRTS, StepStone Group NASDAQ: STEP and Victory Capital NASDAQ: VCTR.
Brookfield has shown strong price action recently. Total returns by time frame are:
- One year: 69.19%
- Year-to-date: 38.19%
- Three months: 27.18%
- One month: 10.84%
The stock cleared a flat base in February and traveled higher, trending along its 10-week moving average. It pulled back repeatedly along the way, consistently finding support.
It gapped below that line in heavy volume on July 19, but traded higher on July 20 and gapped up on July 21, finishing the session 2.3% above the 50-day.
Since then, it closed above its 10-day line in every single session, including Thursday.
The stock is currently extended beyond a reasonable buy point, but the next pullback to a key moving average could offer a new chance to enter.
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