BAM is undervalued with strong long-term growth potential driven by stable permanent capital and record fundraising; conservative valuation models suggest significant upside over the next five years.

Brookfield Asset Management is currently experiencing a 20% correction and has lost almost all of its recent gains. It has also fallen 30% from its all-time high.

However, the stock is currently trading at a forward price-to-earnings ratio of just 20, a level very close to its all-time lows. Brookfield also held an investor conference last week, and in today's video, I want to review the highlights I found, because I made it very clear on my channel that over the past few months I have significantly increased my stake in Brookfield Asset Management shares in my portfolio.

So, I'm going to share what I'm thinking about today's stock price and what I'm going to do with my shares as well. So, today’s video will be a comprehensive update on Brookfield Asset Management.

Well, in this first screenshot, we can see that Brookfield Asset Management continues its strong growth, with both chargeable capital and charge-related earnings up 19% year-over-year over the past twelve months .

So, the company's profits are growing by about 20 % annually, which is very strong growth .

Moving on to the next screenshot, it shows us that every business sector is achieving new record numbers. They say the infrastructure sector is on track to have the world's largest infrastructure fund.

The energy sector has witnessed record developments and liquefaction operations. The private equity sector is expected to achieve its largest major fund yet, and Brookfield has invested more than $4 billion in real estate over the past twelve months .

Finally, Brookfield fully integrated Oaktree into Brookfield's credit business . BAM now fully owns Oaktree, one of the world's leading private credit companies .

Oaktree also specializes in opportunistic credit, which is non-performing loans. This means that Oaktree, and now "Bam," grow even more when the economy weakens. In other words, Oaktree is a countercyclical company , which will allow PAM to achieve additional growth when the economy weakens.

This is exactly what PAM explains to us in this next slide as well. PAM now has countercyclical and responsive strategies , which should boost the company's future growth. Because historically, it has faced greater challenges when interest rates rise and the economy weakens.

But now, Oaktree is helping to balance the company's profit growth . Because, once again, it represents an action and a strategy that reverses the economic cycle. Ultimately, PAM should see more stable growth rates going forward.

Okay, let's move on to the next slide. This slide shows that BAM has delivered strong returns to its funds and investors for decades. This is extremely important because Brookfield Asset Management is an investment company.

This is the essence of the entire Brookfield ecosystem. It is their ability to invest the capital of their investors or clients at high rates of return. This is what PAM has been doing for decades now.

Because they have a strong and growing track record of delivering consistent and good returns to their investors, they are able to continue to attract more and more capital from new and existing clients.

We move on to the next slide. This slide shows that BAM's private wealth products have not experienced any quarterly outflows or net redemptions. This is extremely important given the concerns about outflows and redemptions currently being experienced in the market.

Many of Brookfield's asset management competitors have experienced a lot of redemptions, which has effectively led them to restrict or stop redemptions within their funds. This has allowed a lot of fears and negative headlines to spread, and has also weakened sentiment towards the asset management sector in general.

However, Brookfield, as I shared on my channel some time ago, is not experiencing the same refund requests that its competitors and peers are facing.

This is mainly because Brookfield does not follow the same weak strategies; rather, Brookfield's strategies are currently experiencing strong driving forces because they focus on owning real assets that support the backbone of the global economy.

With the global economy currently undergoing a massive infrastructure build-up phase, Brookfield's strategies are once again experiencing record inflows and record growth. They are also raising record amounts of capital.

So, while PAM's stock is affected by negative sentiment and concerns in the news headlines, in essence , it doesn't appear to actually impact the company's performance. I think this allows long-term investors like myself to get very good deals and discounts on BAM shares right now as well.

Moving on to the next slide, this slide shows us that BAM's fundraising is constantly growing. They are having a record year in 2026. They are acquiring other asset management and insurance companies to increase assets under management (AUM), which you can see through the inorganic growth , but on an organic basis, you can also see that fundraising is going in the right direction.

Once again, they are forecasting a record year in 2026, meaning Brookfield is attracting a record volume of capital to its business despite all the uncertainty and concerns surrounding private equity at the moment.

The next slide shows us that Brookfield Asset Management's earnings are also growing strongly at a compound annual growth rate of 16% since 2020. There was a period of slower growth from 2023 to 2024, but business has picked up strongly again and is currently experiencing additional positive winds.

You can also note that BAM was able to grow its profits even under high interest rates , which I think speaks to the quality and stability of this company. And if interest rates do indeed fall at any time in the future, that should provide an additional boost to the company as well.

Moving on to the next slide, this slide talks about carry interest, and Brookfield Asset Management shows us that carry interest in the company is increasing. BAM is expected to generate $3 billion in realized mobile benefits over the next five years.

The carry interest is then expected to rise significantly from the sixth to the tenth year. Therefore, over the next decade, Brookfield Asset Management is expected to generate a significant amount of carryover benefits, which will boost the company's earnings, particularly in the latter half of this decade.

I have been tracking BAM's unrealized carry interest on a quarterly basis since the company's spin-off, and it is growing tremendously. They now have $1.9 billion in unrealized carryover interest on their balance sheet , and you can see that it's growing almost every quarter.

As this unrealized carry interest continues to grow and mature, they will convert it into actual profits for the company.

Brookfield also tells us about its annual carry interest, which now stands at around $1.3 billion. So, if they achieve all of their goals in their existing funds, and are able to return that capital to shareholders, they should be able to generate about $1.3 billion in additional profits from their existing funds.

But these are future earnings, and they do not appear in the company's earnings per share at all today. But again, in the second half of this decade, if they actually manage to realize all of these carryover benefits, and continue to grow, it will add substantially to the company's net profits.

Returning to Brookfield's Investor Day slides, they show us here that fee-liable capital is expected to double over the next five years . Essentially, the company expects its business to double from its current level by 2031.

This is what they are offering as guidance for the next five years.

It is also important to understand that 91% of the fee-paying capital at Brookfield Asset Management is permanent capital. This means that PAM's profits are very stable, recurring and growing because this capital always remains within the company.

It cannot be redeemed at any time, which means Brookfield can rely on this capital to continue generating profits for the company in the long term. Simply put, about 91% of the company's profits are guaranteed, and as this capital continues to grow, profits will grow with it.

Moving to the next slide, it shows that BAM expects its fee-related earnings to reach $6.6 billion by 2031, or $4.08 per share, representing a compound annual growth rate (CAGR) of 16% over the next five years—the same CAGR they've experienced since 2020.

Essentially, they expect their CAGR to continue at the same pace through 2031.

This next slide discusses total distributable earnings , which are projected to reach $6.44 billion in 2031 , equivalent to $3.99 per share. You can also see that they expect to generate $ 1.35 billion in carryover revenue by 2031, which should add to net profits.

That's what I mean. As the realized carry returns begin to flow , they will also start to add to the company’s net profits, boosting the compound annual growth rate of distributable earnings .

They are forecasting a compound annual growth rate of 18% for distributable earnings per share over the next five years.

Now, as Brookfield has historically done, they distribute between 95% and 100% of their distributable profits as cash dividends. Therefore, as distributable earnings per share continue to grow and accumulate, distributed earnings will also continue to grow and accumulate.

They expect annual dividend growth of 15% in the long term. This is one of the things I really like about Brookfield Asset Management's work. The company pays out almost all of its profits as cash dividends, yet it can still grow by 15 to 20% annually because the business is actually growing at no additional cost.

Therefore, it pays out all those profits as cash dividends. The dividend yield is approximately 4.5% today, and this yield is expected to grow by 15% annually as well.

What is also interesting is that BAM has additional growth engines that could cause its distributable earnings to grow by more than 20% annually over the next five years. These contributing factors are things that are not included in their current guidance.

That compound annual growth rate of 18% that we talked about earlier. For example, they do not include any mergers or acquisitions in their growth forecasts. But Brookfield has a history of making large acquisitions.

So, if they make acquisitions over the next five years, which I think they will, they have just acquired the remaining part of Oaktree and fully integrated it into their business.

So, if they make additional acquisitions over the next five years, their compound annual growth rate of distributable earnings could be even higher . And again, they say they believe they can achieve annual profit growth exceeding 20% over the next five years.

And with that, we conclude Daniel Bronk's presentation from Brookfield Asset Management's Investor Day 2026. However, I also took Brookfield Asset Management's Investor Day materials from 2024, 2025, and 2026, as they started holding Investor Days for the public in 2024.

I took all of that and uploaded it to Muse because Muse is now my preferred AI tool . It's completely free. As I've been saying on my channel, I love Muse. I uploaded everything, then asked Muse to analyze all of the investors' days to see if Brookfield was currently on track to meet its 2024 and 2025 targets, and how those targets compare to the company's actual performance.

Essentially, what I'm asking Muse to do here is analyze the numbers against historical targets to see if they are actually on track, lagging behind, or exceeding expectations .

I want to share the analysis that Muse extracted for me. In this first screenshot from Muse Lee's report, he says: " Earnings targets are on track. But capital targets are falling behind.

Portable earnings are being postponed year after year." Then it gives us a table of the results below. The fee-generating capital is currently about 9% behind its original targets for the period 2024-2029.

However, BAM's fee-related earnings are on track. Fee-related earnings per share are on track, and even slightly exceeding expectations. However, distributable earnings per share are about 8% behind, mostly because realized interest targets are slightly delayed and postponed to a later date.

I believe this is mainly due to high interest rates , which have led to a decrease in the value of real estate and other assets, requiring a simple correction and normalization process.

But what I am pleased to see here is that the fee-related earnings and fee-related earnings per share are on the right track, because I believe they are among the most important business indicators for Brookfield Asset Management.

Finally, down here, we can see that the profit margin associated with fees exceeds 60%, which is in line with their long-term goals.

This next slide from Muse shows us once again that fee-related earnings are on track with their initial guidance for 2024 and 2025. In fact, for 2026, fee-related earnings are slightly, and only marginally, ahead of the guidance for the period from 2024 to 2025.

So, with regard to fee-related earnings, BAM appears to be on track and even slightly ahead of its initial targets. However, as I mentioned, the target for distributable earnings has not been fully achieved, and the new guidance indicates that the 2024 and 2025 targets may not be fully achieved either.

As I said, these targets are unlikely to be met because the realized benefits are slightly delayed due to higher interest rates , but in my opinion, this is acceptable because BAM is still growing well.

But when I do my calculations for the discounted cash flow (DCF) model, I'm going to be more conservative now because the growth rates of distributable earnings have come in slightly below their expectations since the split.

So let's now turn to Brookfield Asset Management's discounted cash flow model. Here I will use their earnings over the next five years. They provide five-year targets, so I think it makes sense to use a five-year period in this model .

I assume they will grow their profits by 15% annually. They noted that they expect their distributable earnings to grow by 18% annually, and that they believe they can grow by more than 20% annually if they pursue mergers and acquisitions or if other positive drivers materialize.

But I want to be more conservative in case the distributable profits resulting from realized interest are postponed to a later date again . Therefore, I will use a compound annual growth rate of 15% in this model.

I would also use a price-to-earnings ratio of 25, which is actually lower than what the company is currently trading at, and also much lower than the price-to-earnings ratio at which the stock has been trading since its spin-off.

Historically , BAM stock has traded at well over 30 times earnings, so I think a P/E ratio of 25 for this business is very conservative. Again, it is actually less than what the stock is trading at today.

Then I assumed dividend growth of 15% annually as well, which is in line with earnings, and I think that estimate is also very conservative.

With these inputs, I'm still getting an 18% compound annual growth rate for shareholder value over the next five years, and by the way, this takes dividends into account . It also arrived at a fair value of US$63 and a future share price of US$88, meaning the stock will nearly double over the next five years.

In my opinion, this is still a great compound annual growth rate for shareholder value over the next five years, even according to what I believe is a more conservative, reduced cash flow analysis .

One way you can think about BAM stock right now is that it offers an initial dividend yield of 4.5%, meaning the stock price only needs to grow by about 5.5% annually from here to achieve a compound annual growth rate of 10% for shareholders.

I still believe Brookfield Asset Management is one of the best dividend stocks in the entire market, if not the best, and that's why it forms such a large position in my portfolio, especially in my tax-deferred accounts, because I can take full advantage of the dividends without having to pay any taxes on that income.

What I also do is reinvest those dividends in more BAM shares, but think about that. This is an initial dividend yield of 4.5% currently, which should also grow at a compound annual growth rate of 15% over the long term.

So, over the next five years, if they actually manage to increase dividends by 15% annually, the dividend yield on today’s cost of shares will grow to around 9%. So, this is a very good initial dividend yield that should also produce significant growth and income for my portfolio in the long term.

In addition, the share price will double as a result of the company's core earnings doubling over the next five years. Therefore, I think the stock price today is very attractive, and I bought more shares when I was already in Italy .

I was able to log into my Interactive Brokers account while I was in Italy. Yes, I bought more BAM shares while I was there. Please don't tell my wife . I don't think she knows that I've been buying stocks and getting some work done while we're on holiday in Italy.

But in short, I think there is a lot of negative sentiment towards the asset management sector right now, with their counterparts at Brookfield Asset Management facing restrictions on redemptions. This is causing some concern in the headlines.

We also see some concerns about rising interest rates, but Brookfield has proven its ability to continue growing despite rising interest rates and economic uncertainty.

As we saw earlier in the video, they are actually having a record-breaking year in fundraising right now . So, despite everything that is happening in the world, and despite rising interest rates and inflation, and uncertainty in the global economy and oil markets, Brookfield is still able to attract a record amount of capital for its business.

This is because they continue to invest their clients' capital wisely and generate strong returns on it. As long as they can continue doing that, they will continue to attract more capital to the company and the business will grow.

So, yes, I am a buyer of Brookfield Asset Management shares here. I think the stock price is too low. I believe it is undervalued, and I believe it is poised to deliver a very good compound annual growth rate for investors over the next five years.