Recently the Probes Reporter wrote a negative report on Brookfield Asset Management (BAM, Financial) calling it "An Unanalyzable Black Box." In the report it discusses several government investigations, lack of disclosures about the investigations and Brookfield Asset Management's financial engineering.
This comes about 2½ years after the Southern Investigative Reporting Foundation "SIRF" wrote a negative report discussing Brookfield Asset Management's history, IFRS accounting practices and other issues. SIRF would write another report six months later in November 2013 further questioning Brookfield Asset Management.
Although the reports are one-sided some of the arguments mentioned by the Probes Reporter and SIRF should raise red flags. It has been awhile, but I have also looked into Brookfield Asset Management and came away thinking about the difficulty of analyzing the company. That being said, over the last two decades the company has produced great investment results and has one of the best alternative asset businesses in the investment industry.
Gurus seem to be unfazed by the complexity and concerns. According to GuruFocus in Q2 2015 Glenn Greenberg (Trades, Portfolio) took a 5.49% position and increased his allocation by another 3.08% in Q3 2015. Lou Simpson (Trades, Portfolio) increased his holdings by 2.91% in Q3 2015 and other gurus such as Tom Gayner (Trades, Portfolio), Third Avenue Management (Trades, Portfolio) and Ron Baron (Trades, Portfolio) added to their positions during the quarter.
Each of these gurus probably is aware of the concerns raised, yet they continue to buy. In fact they are so confident that Simpson has more than14% of total assets managed invested in Brookfield Asset Management while Greenberg has more than 8.5%. Both Gayner and Third Avenue have about 4% positions. These are large allocations for each of their respective firms.
These gurus have significant resources and experience to analyze a company such as Brookfield Asset Management. This does not mean you should buy Brookfield Asset Management just because these gurus own it. As a general rule, I do not buy just because other smart people have bought it. I have to be able to understand the company and have confidence in it or else I may be tempted to sell the moment bad news appears. However, with these highly respected gurus buying and owning such large allocations, maybe it is time to take a closer look at Brookfield Asset Management despite the concerns.
