Every now and then, I'm asked a common - yet somewhat annoying - question by friends and fellow market experts alike...
If I could only own one stock for the rest of my life, which one would it be?
It can be an irritating question, because even though the askers often have good intentions, they unwittingly expect a stupid answer.
...or a biotech company that could "change the world," even though the odds of successfully betting on a biotech firm hitting that jackpot are extremely small...
...or a driverless car company, or a drone manufacturer, or some other firm making a device that everyone expects to be ubiquitous in a few years...
Which of these super sexy and exciting stocks would I buy now and hold forever?
None of them.
I would instead pick a company that will rent those super sexy firms their office and warehouse space. My company will supply electricity, sell fuel, provide water, and dispose of wastewater for those "super sexy" companies and whoever ends up replacing them over the next few decades.
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I'll admit I'm not smart enough to know which tech company will dominate the next 50 years. Or which will be replaced by three guys in a garage experimenting on a gaming system in Toledo. But I am smart enough to know that, no matter which tech company wins, it will always need infrastructure, power, water, and other basics.
Much like Levi Strauss getting richer than any miner during the California Gold Rush, I will get rich and stay rich selling those basics to the explorers.
This stock also has a Money Morning Stock VQScore™ of 4 - indicating that it has strong growth potential in addition to its solid financials.
And the company I'm showing you today does all of that, boasting one of the most profitable and uniquely diverse businesses I've ever seen...
The Massive Global Reach of My "Forever Investment"
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If I had to choose one stock to own for the rest of my years, it would undoubtedly be Brookfield Asset Management Inc. (NYSE: BAM).
Even if I somehow stumbled upon the Fountain of Middle Age and was able to go back in time a couple decades, I'd still choose this as my one stock over the then-fledgling tech titans.
The Toronto-based Brookfield manages $285 billion in assets for itself and its clients. It invests in real estate, infrastructure projects, renewable energy, and private equity, with properties, projects, and companies all over the globe. Brookfield was founded in 1899 as a Brazilian streetcar producer but has since evolved into a successful, global asset manager.
The company's real estate divisions, including Brookfield Property Partners LP (NYSE: BPY), own 261 office properties around the world.
Now, these aren't just your run-of-the-mill suburban office centers. These office towers dominate the skylines of some of the biggest cities in the world. In fact, as the largest landlord in Los Angeles, you're looking at Brookfield-owned buildings every time you see that famous skyline on TV.
And you'll essentially become a part-owner of these buildings once you become a BAM shareholder.
The company also has 47 million square feet of what we call "light industrial" properties. That may sound like a snoozer until you realize those properties are warehouses and shipping centers that Brookfield rents out to Amazon and other tech giants.
As you can imagine, having the largest e-commerce company in the world cut you rent checks has its advantages. And all of those millions of dollars' worth of checks funnel straight to Brookfield.
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"Infrastructure" is another term that usually makes your eyes glaze over. That is, until you understand that investing in infrastructure like shipping docks, water pipes, and cell towers means toll collecting. And toll collecting means always making money, because cars are always driving through.
This reminds me of that famous scene in "Goodfellas" where Henry Hill explains the mob's "[expletive] you, pay me" strategy, where even if business is going poorly or even if you're struck by lightning, the customers or clients still have to pay.
Need water in Brazil? Pay Brookfield, because it owns the pipes that transport water to your faucet. Need to dock and unload your merchant ships? Pay Brookfield, because it owns ports all over world. Want some electricity? Pay Brookfield. Cell phone call in France? Pay Brookfield.
You get the idea. This company owns the types of assets people need to live their lives. As shareholders, we get paid when those people simply go about their everyday routines.
But Brookfield's most exciting business, in my opinion, is renewable energy, which will become one of the fastest-growing sectors for decades to come.
The firm has over 250 wind, solar, and hydroelectric facilities across North America, Latin America, and Europe that produce clean energy. That clean energy is not only desired by lots of people, but it's also mandated by governments around the world. Just look at California, which recently passed an ambitious law requiring half of the state's electricity to come from renewable sources by 2030.
And finally, Brookfield's private equity arm primarily owns companies in the services sector. Again, these are businesses that fulfill everyday needs and include gas stations, real estate companies, construction firms, and energy companies.
I know that's a ton of assets, but we're still just scratching the surface of Brookfield's incredible global reach.
Not to mention, we haven't even talked about the company's all-star management team.
These are the people making Brookfield the perfect "forever stock," and they are, without a doubt, among the most gifted minds in the business...
Brookfield's Leaders Don't Need a Crystal Ball - and That's a Good Thing
Led by CEO Bruce Flatt, Brookfield's management boasts a proven track record and, most importantly, these execs own about 20% of the firm.
In other words, they're insiders with a lot of skin in the game, meaning they're invested not just in the company but also in maintaining the company's growth.
Mr. Flatt detailed his growth approach in the company's Q1 shareholder letter, noting, "We are not macro investors, but micro investors. Of course, broad economic trends affect all of our businesses but what is more important to our long-term success is our ability to find great businesses in good countries that will stand the test of time, irrespective of short-term politics... in fact, the short-term noise frequently provides opportunities to acquire assets at reduced valuations (or to sell them for premium returns)."
This mirrors my own philosophy of buying companies at reduced valuations and holding them through the bombastic market noise to generate long-term profits. That's why I trust the men at Brookfield's helm to keep growing the company into a business that will generate revenue forever.
Again, I don't have a crystal ball, nor do I indulge in predictions often. So looking out a few decades in the future is never easy for mere mortals like ourselves.
It is difficult to predict which technology giant will emerge dominant or which biotech company will have the most significant breakthrough.
I do not know who the winners in artificial intelligence or autonomous vehicles will be. It's nearly impossible for anyone to accurately predict what the next disruptive discovery might be.
Despite those realities, one thing I do know is that all of these companies will need offices, warehouses, energy, transportation services, homes, fuel, and food. I know that renewable energy will be a big part of the global energy solution, and that solar, wind, and hydroelectric power will play a prominent role.
Owning Brookfield means I'm sure to see outsized long-term returns without having to (falsely) predict the future. By investing in Brookfield, I'm investing in the long-term certainties of the global economy.
Those certainties include the need for real estate, infrastructure, and energy, no matter what happens in the markets or how the geopolitical landscape changes over the next several decades.
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About the Author
Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of Peak Yield Investor.