Seeking Alpha Touts BAM Growth Amid BN's Persistent Risks

What happened

A Seeking Alpha article highlights Brookfield Asset Management's (BAM) growth potential, noting double-digit earnings growth in 2025 driven by record fundraising and fee-bearing capital, while positioning it to benefit from retirement account shifts and private market expansion. However, the DeepValue master report on Brookfield Corp (BN) reveals underlying financial strains, including a ~22% share price rise over 12 months, a rich ~125x P/E, and thin profitability with ROE around 1.4%. BN faces significant headwinds such as high leverage (net debt/EBITDA of 7.5x), weak interest coverage (~1.1x), and an 18% revenue decline, compounded by governance issues like TSX issuance rules and related-party deals. The article's optimism overlooks BN's structural complexities, including real estate overhangs and regulatory risks, which could dilute BAM's isolated strengths. Thus, while BAM may exhibit fee growth, investors must scrutinize BN's holistic risk profile to avoid overestimating its investment appeal.

Implication

The article's focus on BAM's growth potential may distract from BN's critical vulnerabilities, including high leverage and valuation concerns that could pressure long-term returns. BAM's fundraising success aligns with one of DeepValue's watch items, but sustained outperformance against peers like Blackstone is necessary to offset BN's balance sheet weaknesses. BN's governance issues, such as dilutive TSX placements and opaque transactions, justify a structural discount that the current price fails to reflect, demanding a wider margin of safety. Monitoring BAM's fee-related earnings and BN's deleveraging progress is essential, as any slowdown or increased stress could exacerbate risks. Ultimately, while BAM offers exposure to alternative asset growth, BN's complex conglomerate structure and financial health require careful evaluation before any investment decision.

Thesis delta

The article reinforces BAM's growth narrative, supporting the DeepValue report's watch item on fundraising, but it does not address BN's core risks of leverage, valuation, and governance. Therefore, the overall 'WAIT' thesis remains unchanged, with no shift toward a more bullish stance until evidence of improved balance sheet metrics and reduced complexity emerges.