Flatt believes Brookfield’s best days lie ahead of it. Its long-term target is to deliver annualized returns of 15% or more over the long term. The company is in a better position than ever to achieve that.

A few factors support that view. First, Brookfield believes the market is undervaluing the company today. Management estimates that the stock should trade at around $84 per share based on the earnings capacity of its core franchises. That’s significantly above its current price of less than $60 per share.

On top of that, Brookfield has significant embedded growth. The company expects to grow its earnings per share by more than 20% annually over the next five years. That forecast is based on the expected continued expansion of its asset management and wealth solutions businesses, the carried interest in its investment funds (its share of the profits), and its ability to adeptly allocate the excess capital generated by its operations. Brookfield expects to produce a cumulative $47 billion, or $30 per share, of free cash flow over the next five years, giving it plenty of cash to allocate toward growing shareholder value.

The growth drives the company’s belief that it will increase its underlying value to $176 per share by 2029. That would amount to an annualized growth rate of 16% from its current estimated value and more than 25% from its actual share price.

Brookfield and its subsidiaries are among my top holdings. I’ve held shares for more than a decade and routinely add to my position because Flatt is such a fantastic wealth creator. Like him, I believe Brookfield’s best days are still ahead of it, which is why I think Ackman’s decision to load up on shares is a brilliant move. I expect that decision will make him and his investors a lot of money.

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Matt DiLallo has positions in Berkshire Hathaway, Blackstone, Brookfield Asset Management, Brookfield Corporation, Brookfield Infrastructure Corporation, Brookfield Infrastructure Partners, Brookfield Renewable, and Brookfield Renewable Partners and has the following options: short January 2025 $60 calls on Brookfield Corporation. The Motley Fool has positions in and recommends Berkshire Hathaway, Blackstone, Brookfield, Brookfield Asset Management, and Brookfield Corporation. The Motley Fool recommends Brookfield Infrastructure Partners, Brookfield Renewable, and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

Billionaire Bill Ackman Recently Bought One of My Favorite Stocks. Here’s Why I Think It Was a Brilliant Move. was originally published by The Motley Fool