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Hawk’s Nest

Unusual Call Buy into Weakness in Leading Alternative Management Firm

by | Jul 23, 2021

Brookfield Asset Management (BAM) with an unusual buy of 1000 September $50 calls on 7/20 at $1.45 into weakness and shares have bounced strong the last few days with these calls now trading $2.70. BAM will report on 8/12 and shares higher 5 of the last 8 reports while asset management peers have been posting strong numbers this quarter. BAM shares are putting in a a strong weekly reversal candle off the 21-week moving average and now near a new high. BAM has been active taking a 19.9% stake in American Equity (AEL) in October and announced a deal to buy the remaining units of Brookfield Property (BPY) for $5.9B in January. BAM is aa leading global alternative manager benefitting from the secular growth in private markets. BAM is rapidly shifting away from on-balance sheet activities toward asset management earnings streams. BAM is well-balanced and diversified AUM base across Real Estate, Infrastructure, Renewable Power, Private Equity, Credit, ad Liquid/Other. Given its structure, BAM reports various key reporting metrics, including Fee-Related Earnings (FRE), Funds From Operations (FFO), Cash Available for Distribution/Reinvestments (CAFDR), and Distributable Earnings (DE). BAM’s Renewable Energy platform ($37B in FBAUM or 13% of total) as an important growth advantage amid rising interest from investors, partially driven by an increasing focus on ESG. BAM has a market cap of $82.5B and trades 2.35X Book and 5.8X EBITDA with a 1% dividend yield. BAML FRE is seen growing at a 20% CAGR through 2023. BAM’s real estate businesses comprises ~30% of earnings (FFO, CAFDR, FRE), while BPY is the biggest contributor amongst the real estate businesses. Bloomberg recently reported the company is considering a takeover of German real estate firm Alstria which is valued near $3.9B and BAM already owns an 8.35% stake.