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Warren Buffett said famous that investors should buy shares of large companies and hold them forever. At the Motley Fool, we take advice from Buffett to heart, and we believe in the power of a long-term perspective on investment.
While everyone likes to find good value stock, sometimes it’s better to buy a great company’s stock at a reasonable price as opposed to a mediocre company’s stock at a discount. Stocks of companies with excellent sustainable performance make the best buy-and-hold.
For this reason, new Canadian investors should focus on stocks of companies with excellent fundamentals, understandable business models, essential products and services, a broad economic moat, strong financial ratios and good management.
Brookfield Asset Management
My beginner stock pick today is Brookfield Asset Management (TSX: BAM.A) (NYSE: BAM). New investors can think of BAM as a holding company with investments in a wide range of interests.
If you want to split your bet between real estate, renewable energy, infrastructure, venture capital and private equity, you can literally do it all by just buying BAM.
When you buy shares of BAM, your capital is essentially managed by one of the best asset management companies in the world, used in various businesses.
Evaluation
BAM is a solid enough of a company that I don’t worry about trying to get a good entry price long. However, new investors should still be aware of some basic valuation metrics so they can understand how companies are valued and what factors affect their current price.
At present, BAM extends gains since Monday and is trading at $ 70.59, which is extremely close to the 52-week high of $ 79.04. In the current quarter, down from 52 weeks of BAM is $ 54.27.
Current BAM has a market capitalization of 106.62 billion with approximately 38.81 billion shares outstanding. This gives him a 261.75 billion enterprise value of $ and a ratio of EBITDA enterprise value of 13.61, similar to its industry peers.
Over the past 12 months, BAM’s price/earnings ratio was 30.54, with a price/free cash flow ratio of 36.42, a price/book ratio of 2.48 and book value per share of about $27.66.
BAM is currently covered by a total of 21 analysts. Among them, 12 issued a “buy” rating, while the remaining nine issued a “sell” rating. This is generally considered a bullish sign.
BAM has a Graham’s number of $37.41 for the past 12 months, a measure of a stock’s upper bound intrinsic value based on its earnings per share and book value per share. Generally, if the share price is less than the number of Graham, it is considered undervalued and deserves to be invested.
Is it a purchase?
Although the current stock price is more or less fairly priced, long-term investors should consider establishing a position if they have the capital. Over the next 10-20 years, your price of entry won’t matter as much if BAM continues its solid track record of growth and profitability. Constantly buy shares of BAM, particularly if the market corrects can be a great way to block a low cost base.
