Should Brookfield Asset Management Inc. Take a Piece of Trans Mountain?

Brookfield Asset Management Inc. (TSX:BAM.A)(NYSE:BAM) is considering investing in the Trans Mountain pipeline. Should shareholders like this idea?

| More on:

Brookfield Asset Management Inc. (TSX:BAM.A)(NYSE:BAM) held its annual general meeting June 15. Among the topics up for discussion was a possible investment in the Trans Mountain pipeline by the alternative asset manager.

Good idea? Bad idea? Here are my two cents on the subject.

Good idea

One of the major platforms in Brookfield’s investment strategy is infrastructure. It’s one of the largest owners of infrastructure assets on the planet, so it’s only natural that CEO Bruce Flatt would be open to the possibility.

“We look at all infrastructure,” CEO Bruce Flatt said in an interview at the company’s annual general meeting. “If there’s something that makes sense for us, given everything that has gone on, we’ll consider it.”

Flatt didn’t become one of the most successful CEOs in Canada by closing the doors to potential opportunities.

As a company that goes everywhere to find undervalued infrastructure assets, it’s nice to think that it would actually consider something so large right in its own backyard.

Equally important are the optics of an investment in the Trans Mountain pipeline. By making a considerable investment in the existing pipeline system and its expansion, Brookfield is projecting a healthier economic picture for Alberta and the oil and gas industry in the years ahead.

If you’re an oil and gas investor, this support would be music to your ears.

Bad idea

From the get-go, I saw the Kinder Morgan Canada Ltd. (TSX:TML) IPO as nothing more than an act of desperation by a pipeline company with too much debt at both the parent and its Canadian subsidiary.

“At the end of March, Kinder Morgan Inc. (NYSE:KMI) had US$35.1 billion in net debt on its books — 81% of its $43.2 billion market cap. That’s not an insignificant amount,” I stated May 25, 2017. “Sure, it reduced its long-term debt in 2016 by more than $5 billion, but compared to a big integrated oil company like Exxon Mobil Corporation (NYSE:XOM), whose US$20.2 billion in net debt works out to just 5.8% of its $349.9 billion market cap, it’s huge.”

Ultimately, I recommended that investors avoid shares of Kinder Morgan Canada. Today, more than a year later, it’s trading a buck below its IPO price.

Kinder Morgan issues aside, I’m not sure Brookfield needs the headache of investing in this very controversial pipeline. Yes, Albertans are big supporters — 82% of the province think it’s a good thing — but the rest of the country isn’t nearly as enthusiastic about the pipeline itself or the government’s purchase of it, albeit on an interim basis, until someone like Brookfield takes it off its hands.

On the one hand, Brookfield might be getting a distressed asset, but given that it’s putting a lot of weight behind renewable energy in China and elsewhere, I’m not sure that squares with where it sees the world heading over the next 10-20 years.

Ultimately, everything for Brookfield is about intrinsic value and how much of deal it can get on what it feels is the true number. 

The bottom line

I’m sure whatever Bruce Flatt decides will be the right call. However, if Justin’s waiting for Flatt to write a cheque for $4.5 billion, he’s going to be waiting a long time.

Should you invest $1,000 in 8x8 right now?

Before you buy stock in 8x8, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and 8x8 wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Will Ashworth has no position in any stocks mentioned. The Motley Fool owns shares of BROOKFIELD ASSET MANAGEMENT INC. CL.A LV and Kinder Morgan. Brookfield is a recommendation of Stock Advisor Canada.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Investing

clock time
Bank Stocks

1 Magnificent Financial Stock Down 23% to Buy and Hold Forever

This top TSX financial stock is trading well below its recent peak, but its long-term fundamentals remain rock solid.

Read more »

dividend growth for passive income
Bank Stocks

This Canadian Bank Pays 4.75% and Could Double Your Money by 2030

A Canadian bank is a top pick for its lucrative dividend and potential to double your money in five years.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How I’d Invest $7,000 in My TFSA for $660 in Tax-Free Annual Income

Canadians looking for ways to make the most of the new TFSA contribution room should consider investing in these two…

Read more »

oil and natural gas
Energy Stocks

1 Magnificent Canadian Energy Stock Down 23% to Buy and Hold for Decades

This oil and gas producer has increased its dividend annually for more than two decades.

Read more »

Silhouette of bull in front of setting sun
Investing

Where I’d Invest $2,500 in the TSX Today

Given their solid underlying businesses and healthy growth prospects, I am bullish on these TSX stocks.

Read more »

path road success business
Dividend Stocks

How to Invest $50,000 of Tax-Free Cash as Canada-US Trade Uncertainty Escalates

Few Canadian stocks are as easy a choice as this one, making it perfect during volatile periods.

Read more »

Doctor talking to a patient in the corridor of a hospital.
Dividend Stocks

This Dividend King Paying 7.5% in Monthly Income Is a Must-Have

This high-yield TSX stock might not be a textbook Dividend King, but its reliable monthly payouts and improving financials make…

Read more »

monthly desk calendar
Dividend Stocks

How I’d Generate $200 in Monthly Income With a $7,000 Investment

Want to establish $200 in monthly income (or even more?) Here's an easy way to start today that will provide…

Read more »