On today’s TSX Breakouts report, there are 84 stocks on the positive breakouts list (stocks with positive price momentum) with just five securities on the negative breakouts list (stocks with negative price momentum).
Discussed today is a security that appears on the positive breakouts list.
The stock has been a solid performer for long-term investors, outperforming the S&P/TSX composite index for six of the past seven calendar years (2016 was the exception). The stock currently has eight buy recommendations with a potential 16 per cent total return forecast (including the 1.4 per cent dividend yield). The security highlighted today is Brookfield Asset Management Inc. (BAM.A-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
Toronto-based Brookfield is an asset management firm, operating in more than 30 countries, with approximately $350-billion in assets under management. The company has a diversified portfolio of assets focused in real estate, renewable power, infrastructure, and private equity.
Before the market opened on Feb. 14, the company reported its fourth-quarter financial results. Funds from operations (FFO) per share came in at US$1.35, surpassing the consensus estimate of 85 US cents per share.
In the earnings release, chief executive officer Bruce Flatt commented on the financial results and highlighted the company’s financial flexibility to fund future investments, “We had a record year, generating $7.5-billion of net income. Fundraising has been strong and included the recent closing of our largest flagship real estate fund to date at $15-billion, as well as a $7-billion first close for our flagship private equity fund. We invested or committed $35-billion into new transactions during the year, and ended the year with $34-billion of capital for deployment globally.”
On the earnings conference call, Mr. Flatt remarked on the international economic landscape and future growth opportunities, “Turning to economic fundamentals, they generally remain strong globally, as we observe across all of our businesses. In specific markets, and I'll mention a few, the U.S. economy, while slowing from the pace of '17, early '18, continues to be strong, with interest rates still at historically low levels, and we expect that to continue. Economic momentum in Europe has been slow for a while due to uncertainty over Brexit, Italian issues, and long-term structural components of the market. We expect the activity to be better once the outlook on Brexit becomes clearer, but in the meantime, we always find select opportunities to deploy capital. South American markets where we invest have been recovering nicely, with Brazil the slowest. But Brazil is now set to recover that a new government is in place. We will continue to make tuck-in acquisitions around our businesses and monetize investments as the currencies and economies recover. Asia continues to increase its importance in the global economy, and while trade issues are disruptive, possibly, and are so in the short-term, and growth is slowing due to large numbers, these countries are extremely important to the investment markets globally, and we will continue to judiciously increase our investments in India, China, Japan and South Korea.”
The company will be reporting its first-quarter financial results before the market opens on May 9.
The stock is dual-listed, trading on the Toronto Stock Exchange under the ticker, BAM.A, and on the New York Stock Exchange under the ticker, BAM.
The company pays its shareholders a quarterly dividend of U.S. 16 cents per share, or U.S. 64 cents per share on a yearly basis. This equates to an annualized dividend yield of approximately 1.4 per cent. Earlier this month, the company announced 6.7 per cent dividend hike, raising its quarterly dividend to its current level of U.S.16 cents per share from U.S.15 cents.
The stock is covered by nine analysts, of which eight analysts have buy recommendations and one analyst (from Accountability Research) has a “hold” recommendation.
The nine firms providing research coverage on the company are as follows in alphabetical order: Accountability Research, BMO Capital Markets, Canaccord Genuity, CIBC Capital Markets, Credit Suisse, Keefe, Bruyette & Woods, RBC Capital Markets, Scotiabank, and TD Securities.
Earlier this month, Cherilyn Radbourne, the analyst at TD Securities, increased her target price to US$62 from US$57. Neil Downey, the analyst from RBC Capital Markets, lifted his target price to US$48 from US$47. Mario Saric, the analyst at Scotiabank, bumped his target price up to US$53.50 from US$52.50. Harriet Li, the analyst from Accountability Research, took her target price up by $1 (Canadian) to $52 from $51.
The consensus FFO per share estimates are US$3.85 in 2019, rising 10 per cent to US$4.23 in 2020.
Financial forecasts have increased for 2019. To illustrate, three months ago, the FFO per share consensus estimate was US$3.71.
According to Bloomberg, the stock is trading at a price-to-FFO multiple of 11.7 times the consensus 2019 estimate, below its three-year historical forward average multiple of 13.8 times.
All but one analyst (the analyst from Accountability Research) express their target prices in U.S. dollars. The average one-year target price is US$51.29, implying the share price may appreciate nearly 15 per cent over the next 12 months. Target prices range from a low of $52 Canadian, the low on the Street is from Harriet Li, the analyst at Accountability Research, to a high of US$62 (the high on the Street is from Cherilyn Radbourne, the analyst at TD Securities). Individual target prices are as follows in numerical order: $52 (Canadian), US$48, US$50, US$52, US$53, two at US$53.50, US$54, and US$62.
Insider transaction activity
The most recent transaction in the public market reported by an insider occurred in early December.
On Dec. 5, Robert Harding, who sits on the board of directors, sold 28,100 shares at a price per share of $58.0055 for an account in which he has indirect ownership (The Robert Harding Foundation), Proceeds from the sale totaled over $1.6-million. This account no longer holds any shares of Brookfield Asset Management.
The stock chart is attractive with the share price remaining in an uptrend that began in early 2016.
On Tuesday, the stock price closed at a record high. Year-to-date, the share price is up over 12 per cent. The stock is in overbought territory with an relative strength index reading of 70. Generally, a reading of 70 or higher reflects an overbought condition.
In terms of key resistance and support levels, the next ceiling of resistance is around $60 (Canadian). After that, there is major overhead resistance around $70. Looking at the downside, the shares price has strong technical support around $55, near its 50-day moving average (at $55.28) and its 200-day moving average (at $55.14).
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.