Meet the Monster Stock That Continues to Crush the Market

You can grow a lot richer by investing in the S&P 500. That broad market index has delivered an 11% annualized total return over the last 30 years. Because of that, a $1,000 investment made three decades ago into an S&P 500 index fund would have grown over 2,000% to more than $22,250 today.

That's a great return. However, it pales compared to the monster 18% annualized return (over 13,800% in the last 30 years) produced by Brookfield Corporation (NYSE:BN). Here's an introduction to this wealth-creating juggernaut.

Over a century of results

Brookfield traces its roots back over 100 years. The company has a rich heritage of owning and operating real assets like infrastructure, real estate, and renewable power. It has evolved over the decades by leveraging its expertise to build adjacent platforms. Today, it has three core businesses: alternative asset management, wealth solutions, and operating businesses.

The company built its leading alternative asset manager, Brookfield Asset Management, from the ground up. It has over $1 trillion in assets under management (AUM), rivaling more well-known Wall Street firms Blackstone and KKR. It manages funds that invest in renewable power, infrastructure, private equity, and credit.

Brookfield Corporation owns nearly three-quarters of Brookfield Asset Management. It also holds the carried interest (percentage of the profit) from legacy funds managed by that entity.

Second, Brookfield Wealth Solutions, a leader in its field, provides a range of retirement services, wealth protection products like insurance, and other solutions to companies and individuals.

Lastly, Brookfield has operating businesses in renewable power (Brookfield Renewable), infrastructure (Brookfield Infrastructure), business and industrial services (Brookfield Business), and real estate.

In many ways, Brookfield Corporation is very similar to Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B). Like Warren Buffett's company, it has insurance operations that provide additional capital to invest. The company also generates copious amounts of cash flow via its operating businesses and asset management platform, giving it more capital to invest. The company allocates that into expanding its core businesses and some of its funds, which focus on buying high-quality companies on a value basis, similar to Buffett's investing style.

Of note, Brookfield Corporation has done a better job growing value for its investors than Buffett over the past few decades. Its 18% annual return has crushed the 13% yearly return of Berkshire over the past 30 years.

It's poised to continue crushing the market

Brookfield Corporation aims to deliver 15%-plus annual returns for its investors over the long term, and it believes it's in a better position today to achieve that ambitious aim than ever before.

Several catalysts drive that view. One factor is the growth it foresees across its three core businesses. It expects to grow its earnings per share by more than 20% annually over the next five years, driven by realizing carried interest earned in its funds, expanding its asset management business, continuing to build its wealth solutions business, and adeptly allocating the massive amount of capital flowing into its businesses.

On that last point, Brookfield expects to produce a cumulative $47 billion, or $30 per share, of free cash flow over the next five years to allocate toward growing shareholder value.

The company has aligned its investment strategy to capitalize on several major macroeconomic themes, including decarbonization, deglobalization, and digitalization. It's investing its funds and capital across these megatrends, which should generate outsize returns for fund investors and Brookfield.

These factors underscore the company's belief that it can significantly grow its underlying value in the coming years. Brookfield currently estimates its value at $84 per share (well below the current stock price of less than $60). It believes it can grow the value of the company to $176 per share by 2029 -- a 16% compound annual rate. Given its lower stock price, the total return for shareholders would be even higher at more than 25% annually.

Monster return potential

Brookfield Corporation has done a phenomenal job growing value for its shareholders, crushing the returns produced by the S&P 500 and Warren Buffett's Berkshire Hathaway over the past three decades. Given the strength of its core business and alignment with several major investment themes, it firmly believes even better days lie ahead. These factors position it to continue trouncing the market, making it a great stock to hold for the long haul.

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Matt DiLallo has positions in Berkshire Hathaway, Blackstone, Brookfield Asset Management, Brookfield Corporation, Brookfield Infrastructure Corporation, Brookfield Infrastructure Partners, Brookfield Renewable, Brookfield Renewable Partners, and KKR and has the following options: short January 2025 $60 calls on Brookfield Corporation. The Motley Fool has positions in and recommends Berkshire Hathaway, Blackstone, Brookfield, Brookfield Asset Management, Brookfield Corporation, and KKR. The Motley Fool recommends Brookfield Infrastructure Partners, Brookfield Renewable, and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.