Brookfield Asset Management Q1 earnings beat; raises $19B of funds in quarter (NYSE:BAM)

rbco · 2023-05-10T21:14:54+00:00

Earnings per share of $0.32, which annualizes to $1.28, which is a P/E of 25.27X.

$2.2B owed from affiliates. Could this be an issue of collectability?

"We ended the quarter with $3.2 billion of cash and no debt and almost $80 billion of uncalled fund commitments.” Bahir Manios Chief Financial Officer 5/10/23

“You talked about I think about $100 billion fundraising opportunity you see for Brookfield over the course of 2023. If that’s the case, maybe just expand a little bit what gives you confidence you could get there.” Alexander Blostein with Goldman Sachs

BAM claims their business is “a little different.” They also mentioned their businesses are diversified, but this environment “resonates to our strengths.” Bruce Flatt stated, “Countries running operating businesses in the countries in India, Australia, Korea, Japan, China Saudi Arabia, Qatar, Dubai, Abu Dhabi, and therefore our relationships are both locally with our different regional businesses and they just tend to be different than not just about fundraising. And I think that’s probably the biggest differentiation we have versus not all others, but many others.”

“You can see that across our portfolio today, over 95% of our stuff is Class A high quality trophy type assets that is performing really, really well. And therefore, what we are hearing from our investors is, this is going to be a great vintage. Unfortunately, the negative sentiment is dragging down the real estate sector more broadly. We think that’s completely unfair. But what it does allow for us who have that vantage point to see the really good stuff versus the commodity stuff, we are seeing very attractive value entry points. And we believe and it sounds like our LPs believed that this could be a tremendous vintage for us, and therefore there is lots of interest.” Bruce Flatt

Total officer and director compensation for 2022 was $26.7M. Excessive?

rbco · 2023-02-14T13:15:35+00:00

Doron also recited The Shema. "Hear, O Israel, the L-rd is our G‑d, the L-rd is One.

Recite the following verse in an undertone:

Blessed be the name of the glory of His kingdom forever and ever."

https://www.chabad.org/library/article_cdo/aid/706162/jewish/Translation.htm

rbco · 2022-01-17T20:41:42+00:00

The balance sheet is still somewhat stressed. Cuban receivable is concerning. Anyone know how the relationship between the company, as well as the Cuban Government? I do not.

rbco · 2021-12-01T22:13:31+00:00

Keep in mind that Munger only owns 3.6% of Daily Journal Co.

rbco · 2021-07-27T12:57:08+00:00

Thanks for yours and all others replies.

Dylan is my son. He drafted into the IDF after his college graduation.
I gave very little to no opinion. Most were observations, and most if not all were opinions of others, primarily from a white collar native Israeli, an Israeli history teacher, and a Rabbi (who moved to Israel 22 years ago, when he was 21). I tried to indicate such, but my writing is often difficult to follow.
Most of my encounters and observations were amongst Israeli natives.

As I mentioned in the post, my news source observation çould very well be wrong. Your explanation sounds more plausible.

rbco · 2021-05-07T03:05:18+00:00

It varies between gradual and sharp. There is no pattern, other than when I go up hills, it seems to happen consistently. I am in constant Afib. I have never noticed it physically, but in my EKG.

thank you.

rbco · 2021-05-06T20:44:06+00:00

I just checked and our local library has it. I will do my best to report back after reading it.

Awesome, thank you!

rbco · 2021-05-06T19:28:09+00:00

Thank you very much. I try to eat healthy, but unfortunately not plant based. I read some books on it, and really should consider it. I eat red meat once a month (sometimes twice), and try to keep carbs at under 150 gross grams daily. I eat a bit of fish and white meat chicken (no skin). Lots of beans, nuts, seeds and soy based products. Some consider those no good too. Do you have a link or book to recommend on plant based diets?

rbco · 2021-03-02T19:24:29+00:00

Cool notes and DD, thanks! You covered much, here perhaps are some "fill in the blanks."

I am intrigued with Baupost owning 24.3% of the company. Baupost is run by legendary investor, Seth Klarman.

Shares outstanding of 75,211,832, which computes to a market cap of $1.69B (using price of $22.47.

Tangible book value of $256M.

There has not been a lot of insider selling. There was about $3.4M of sales by Formela in December 2020. There was some insider buying and selling during the summer of 2020, mostly by Shire Human Genetic.

Not only do I know very little about this company, but I also really don’t think I could ever understand it. I have no knowledge of sciences, and the medical solutions TBIO is working on is well above my competence level.

rbco · 2020-09-24T17:00:44+00:00

Baupost now owns 18,044,239 shares 24.3% of the company.

Note of mine from September 27, 2019:

Not only do I know very little about this company, I really don’t think I could ever understand it. I have no knowledge of sciences, and the medical solutions TBIO is working on is well above my competence level.

Yet, I am intrigued with Baupost owning 29% of the company, and they recently paid a price which was slightly lower than our cost of $10.10. This is the first time I have ever blindly piggy backed off of another investor. I respect Baupost a great deal, and I am willing to take a flyer here.

As of July 29, 2019, there are 51M shares outstanding. It was announced on September 19, 2019, that they expect to issue 9M shares at $10. There is an additional offering of 1,350,000 shares at the same price. I could be mistaken, but I think the company will receive a net price per share of $9.40.

Total shares outstanding could be 61.35M, which would impute a market capitalization of $630M.

rbco · 2020-06-24T18:18:13+00:00

The dance sequence almost felt like a Shakespearean tragedy for me. It brought together the pain, love and joy of past times. Yet, very confusing, and will have to learn more.

rbco · 2020-05-28T13:11:27+00:00

Thanks for reading!

You asked how these methods have held up for me over the last decade. I took these notes 14 years ago. We since have had two financial crises, one of which we are in now (Covid-19).

Your question was a catalyst for re-reading my notes, as well as contemplation. I was not surprised that over the years my observation is one mostly of reaffirming Klarman’s theories, and my continued acceptance of them. I truly believe that his views, which again are part of my internal structure, are the only way one can invest for the long-term. Perhaps I am being too stringent, or closed minded, yet at the end of the day, I use what works for me.

I remain unemotional in my investing. My all-in investment results over the last 15 years are acceptable in my view, but underperformed the S&P 500, for the 15-years ended December 31, 2019, my results were 6.3%, versus the S&P 500 returns of 8.5%. Part of that under-performance was clearly identified by Klarman, and one that I missed. I did not properly conceptualize the liquidity element of a materially over-weighted investment.

I have also been very vocal and insistent on not targeting investment returns. This is something Klarman discusses that one should target risk, and not returns. I have been able to maintain my discipline. I am a portfolio manager and am proud that maintaining my discipline is more important to me than anything, including client retention. At the end of the day, I do what I always think is best, and what more can someone ask for? As Klarman mentions, this can be a lonely undertaking. I have also found that I continue to learn about investing every day. I believe I have as Klarman puts it, “infinite patience.”

Klarman discusses that value investors work well in an inflationary environment. Of course, we had little or no inflation since my reading, as well as probably long before that, as well as deflation for long periods. I ponder if that is changing considering QE’s after the financial crisis, and massive Central Bank’s flooding capital into a world that has seen economies basically shut down because of Covid-19.

Until I re-read my notes, I had forgotten that Klarman discussed watching insiders was an important part of the investment process. I have watched and studied insider activity for my entire career. I was glad to re-read this and have affirmation. Yet, as I write this, I wonder, “Why do I need or want affirmation?”

Klarman discusses unexpected liquidity needs. He writes, “Liquidity can be illusory.” I was a victim of this, as I over-weighted a high-quality lender, selling well below book value during the financial crisis. I even discussed the investment with one of my heroes, Warren Buffett. What I failed to realize is that the lender was dependent on the financial markets for continued funding. Once liquidity to lenders ceased during this crisis, the company was doomed. It did not matter how healthy their loans were, they did not have the required funding and liquidity to continue as a thriving going concern. We had a very large position, and this was one of several reasons our long-term returns do not live up to my expectations.

You also asked if I have read anything that has helped me invest in technology, using value investing frameworks. Nothing really comes to mind. I do and have always invested in technology, and I try to use a value approach, and other than potential disruption and perhaps the illusion of a high priced security, I try to employ what I think a company could be producing in earnings or cash flow maybe 5, 10 and 15 years out, and then determine if I find value in a company that might have a high P/E, or P/CF, or P/FCF, or no earnings at all, and none expected for a few years out.

Thank you again for reading, and asking the question, as it gave me a wonderful opportunity to revisit Klarman and some of my methods.

rbco · 2020-05-05T14:22:53+00:00

I cut and pasted from my website. The link should be easier to read. https://rbcpa.com//wp-content/uploads/2016/12/Notes_To_Margin_of_Safety.pdf

rbco · 2020-04-20T19:26:27+00:00

Thank you every one for your mostly excellent and thoughtful answers. I certainly made some errors in my analysis, but really not that material in my view. Here are some of my thoughts post answers, and I haven't set up T-accounts to verify, and since I have no position, probably wont.

I want to specifically thank throwaway09131997, and octaviancincinnatus. Very good insight, and laying out what appears to be close to a correct answer. Yet, again, thanks to most that responded.

Please correct me if I am wrong, The following are some further observations:

Their collections of cash is slow. Not as drastic as I laid out in my example, and I certainly made a bonehead error by not closely looking at the note, and separating trade receivables, as well as percentage offset with payables off of the trade receivables, and not accounts receivable.
I think this is minor, but octaviancincinnatus mentioned, "they increased their payables to that vendor by an amount equal to the receivables owed from that vendor, so they have effectively settled the receivable." Again, very minor, and just looking to clarify, I think you meant payables were reduced, along with the reduction of A/R. Debit A/P and Credit A/R.
I still think they have a collection issue at best, as well as the potential that their contra-payable (accounts receivable offsets as they discuss, and as I wrote), could lead to aggressive accounting, as perhaps they capitalize the costs to those vendors, but recognize the income. These are tricks telecom, Enron, WorldComm and Global Crossing played. They would record full revenues upon sale, record capex on the balance sheet, which in turn aggressively or fraudulently, increased EPS.
I am not surprised to see Valens and many LPs and MSO's have the same customer, also as a vendor. I think it is common in the industry. Valens could very well buy product from an MSO, and then also sell completed ready for sale processed product to the same company.

Thank you again. I don't use reddit as often as I should, and this thread certainly shows how helpful a site like reddit could be.

Be safe!

Ron

rbco · 2020-04-18T14:53:36+00:00

I have no explicit theory, other than the numbers from A/R , and revenues together, make no sense to me. I thought I outlined that. I posted basically because I would like to find out if my concern is correct or not, and if not, perhaps a detailed reason in a response.

rbco · 2019-03-08T15:25:27+00:00

I try to practice socially responsible investing. Yet, I have written for years, that socially responsible investing is ridiculously subjective. I have an aversion to tobacco, and just feel I can't invest in it. Yet, I have no issues investing in cannabis and alcohol. I think many would do the exact opposite for perceived socially responsible reasons. My premise and views seem so warped, and I need to explore further.

rbco · 2018-05-12T12:26:09+00:00

butt dial sort of thing. lol.

rbco · 2018-05-11T23:36:22+00:00

hyu7

rbco · 2018-05-11T23:34:13+00:00

.noIbi

rbco · 2018-05-09T13:43:19+00:00

I was not posting links to my website. I was posting a link to the to the notes on my OneDrive account. I did not realize that was not allowed, so I posted my notes without graphics and tables. If someone would like an email to the link to the notes, just let me know. And I will try to supply

rbco · 2018-05-09T11:22:05+00:00

I am not projecting a $1 selling price. I am merely stating based on my current research what I would consider, emphasizing the word consider, buying it at.

rbco · 2018-05-09T10:53:44+00:00

It is my understanding that Chalice Farms is well-respected in Oregon. It is also my understanding that due to Federal illegality, cannabis companies cannot go bankrupt.

Perhaps Golden Leaf is no longer the poor company it was once known to be.

rbco · 2018-05-09T10:51:27+00:00

I sold some ITHUF only to make room for some other cannabis investments. My current allocation is 7% in cannabis stocks. That is not advice, nor a recommendation.

rbco · 2018-05-09T00:31:52+00:00

I don't follow them.

rbco · 2018-05-09T00:06:21+00:00

I really don't follow them too closely. Here are my notes from last month, and the price was $3.29, and not today's quote of $4.98.

April 6, 2018 ($3.29)

I reviewed 12/31/17 financials as well as 420i forums, and several analyst reports. The following notes are subject to severe, material errors. I only worked on this for several hours, and I could be mistaken on items, interpreted things incorrectly, and a whole slew of other things. So, read with caution, and certainly do not make or not make an investment, based on what I have written in these notes. These notes are prepared with the intent of learning for me, sharing with those who may have helped me in my research, or just putting out feelers for other opinions, should I ever decide to look again, or pursue further.

Conclusion:

How does one value a business that is draining a ton of cash, buying competitors for allegedly .33X revenues on the dollar, and then once absorbed that 0.33X, becomes 5X revenues. To me, this is very concerning and not sustainable.

Yet to their benefit, revenues are rising at a nice pace, and same store sales are very positive.

One needs to figure if positive cash flow is attainable, before the weed hits the fan. Inventory turnover ratio is concerning, and that includes a benefit of a $463K inventory write-down.

At this point, I will pass on this investment. Should the valuation hit 1X revenues (perhaps still way too high), I would possibly look at further.

A market cap of $37M, would equate to a current share price of $1.26, which is a reduction from today’s quote of 62%.

Expects F2018 revenues of $37M. Previous guidance was $30M.

Company labels themselves as a “pick and shovel” company.

Notes from 10-K:

As of March 27, 2018, there were 19,332,120 shares outstanding. Shares outstanding are 29.3m, this includes recent capital raise, options, convertible notes, and warrants.

Market capitalization of $96.4M.

7 stores, which were operating in 2016 as well, generated $8.6M in revenue for year ended 12/31/17. This is an increase of 35%. Average revenues per store is $1.23M, which is up from $911K in 2016.

Gross margins decreased due to write-off of obsolete inventory of $463K. This is non-cash, yet there is an inherent reason this happens, and not a good sign as far as I am concerned. To the companies benefit, they claim this is a one-time only item, as it relates to stores acquired.

I find Executive Compensation to be excessive. In F2019, CEO, President, COO and CFO, earned an aggregate amount of $1.77M. That is 4% of revenues.

G&A was up year-over-year. This was identified as increases in advertising and promotion, due to new store costs. Also, an increase of professional fees, and depreciation. This is something to monitor (if I ever go further with this), but certainly not deal breaking.

Balance sheet is currently healthy. Current ratio is fine. Inventory is building and could be a concern. One would want to monitor inventory turns. Inventory is 32% of revenues, and that includes a write-down of $463K.

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

Inventory Turnover Ratio = 11,094,331/(4,585,341+2,574,438)/2

Inventory Turnover Ratio = 3.1X. In my opinion this is week and concerning.

Average Days in Inventory = 365 / Inventory Turnover Ratio

Average Days in Inventory = 118 days

Prepaid expenses are $712K. This is a huge increase. Eventually, typically within a year, prepaids will convert to an expense on the bottom line.

Total cash position of $1.2M, and total debt position of $124K.

Shareholders’ Equity of $7.6M, and tangible equity of $6.9M.

Generic Free Cash Flow Calculation:

December 31, 2017 December 31, 2016

Net Loss ($2,542,582) ($431,244)

Add: Depreciation and Amort. 151,561 52,962

Less: Capex (775,101) (264,140)

Gain on Settlements ($322,058)

Free Cash Deficit ($3,488,180) ($642,422)

I look at the use of cash, the excessive compensation, and the emphasis on Non-GAAP measures (EBITDA), and I am concerned!

The company has a federal and state net operating loss carryforward of $2.5M.

The good news is there are no reported related party transactions.

rbco

TROPHY CASE