Subject: Re: 2023 Investor Day
you are perhaps viewing the company somewhat as bond ....

All good points. I was simply trying to come up with a perspective that Mr. Market, let's call him MM from now, is possibly using to arrive at current prices.

MM is perfectly happy with a (0.32 * 4)/34.10 = 3.75% distribution yield for BAM. For BN, however, MM wants a much higher earnings yield in the 7% - 9% range. MM is drawing a clear distinction between cash in hand which BAM gives you every quarter, versus DE which BN will reinvest in pursuit of future earnings growth. Perhaps MM doesn't trust BN to reinvest DE wisely and grow earnings as projected? BN does have a track record of delivering earnings growth as projected, but currently market sentiment clearly does not reflect that.

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DE based valuation:

CFO Nick Goodman addressed DE based valuation in his presentation. He acknowledged that their Plan Value of 120 billion or 74 per share is a 24 multiple to current DE of 5 billion per year. A 24 multiple is not cheap!

On a forward looking basis, he said that the current Plan Value of 120 billion or 74 per share, translates to a DE multiple of 15 only. This is because he is expecting an average annual DE of 8 billion for the next 5 years.

Using current share price, instead of Plan Value, gives a DE multiple of 51 billion/5 = 10 and on a forward looking basis, 51 billion/8 = 6.4 only. Definitely very cheap if they end up achieving their DE target.

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Some other perspectives:

If you look at capital allocation, the relatively low level of share purchases doesn't reflect their assessment that current price is at a 55% discount to plan/intrinsic value. Are the other re-investment opportunities really better than buying dollar bills for 45 cents? I am actually okay with the situation. I would rather they invest into BAM funds, insurance, etc. and grow actual earnings rather then repurchase BN shares based on an imagined lofty Plan Value which the market has never agreed with.

They like to point out that their capital base has grown to approximately 140 billion dollars. However, 5 billion earnings on a 138 billion dollar capital base (120 billion plan value + corporate borrowings + perpetual preferred shares) gives you a ROA of only 3.62%. ROE is slightly higher at 5/120 = 4.16%. Not exactly a high margin business if you buy into their assessment of plan/intrinsic value. Using IFRS book value, however, gives a much more respectable ROE of 5/40 = 12.5%

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Overall, the odds are in our favor at these prices. The price is in the zone of reasonableness/cheapness depending on your perspective. Those looking to start/increase allocation will do well dollar cost averaging into BN at current prices.

I finally got through watching 1.5 days worth of Investor Day videos. Even though my allocation to Berkshire is much higher, I very much prefer the Brookfield format where you get to hear from a large number of people in the management team. At least you learn something new every year, compared to at Berkshire where Charlie and Warren just ramble on about this and that. It's enjoyable and entertaining, but you rarely learn anything new about the business or hear from others on the management team.