The greatest way for retirees to acquire money is to invest in shares in expanding businesses and hold them through the inevitable setbacks. The main thing to keep in mind is that several excellent firms are currently trading at appealing levels, and lower valuations are a critical component for rising stock prices.
This month, if I were to allocate $1,000, I would think about splitting it evenly between Brookfield Asset Management (BAM -0.22%) and Amazon (AMZN 0.11%). Let’s examine the strengths these businesses have that should produce enticing profits.
Amazon’s stock is currently down by 45% from its all-time high. The stock fell last year mostly due to a slowdown in retail sales growth, although Amazon’s retail division will eventually pick up speed.
Over the past two decades, e-commerce has gradually increased its percentage of total retail expenditure, but it still only accounts for less than 15% of the U.S. retail market. That gives a well-funded tech-oriented company like Amazon a lot of room to get more clients in the long run. By 2025, the e-commerce business, according to eMarketer, will be worth $7 trillion.
Amazon is more than a retailer, though. It has expanding revenue sources from advertising, high-margin non-retail services, cloud services (Amazon Web Services), and other. These businesses boost the company’s profits and should significantly increase its value during the following ten years.
The firm presently consists of 54% non-retail services. This proportion might be significantly higher given the prospects in advertising alone. For instance, while only accounting for 7% of Amazon’s top line in the fourth quarter, the company’s fastest-growing section was its ad services division, which had a 23% year-over-year growth. Ad services, which bring in $11.6 billion in quarterly income for Amazon, represent a multi-billion dollar opportunity for businesses seeking visibility to the 200 million Prime members.
When shares of this top stock are trading at a discount, investors shouldn’t hold off on purchasing them. The price-to-sales ratio for Amazon stock has dropped to its lowest point since the start of 2015. From these lows, it ought to produce fantastic returns.
Brookfield Asset Management
One of the biggest owners of real estate is Brookfield, which has more than $800 billion in assets under management. Real assets include, among other things, infrastructure, real estate, and renewable energy.
Ten years ago, a $1,000 investment in Brookfield stock would have grown to be worth $6,000 at the stock’s recent peak. The company split in two in December; Brookfield Corporation now owns 75% of the asset management division and Brookfield Asset Management the remaining 25%.
Investors should purchase Brookfield Asset Management right away, particularly if they enjoy dividends. The stock now provides a high 4% dividend yield, and management has a proven track record of managing capital at attractive rates of return.
The corporation is the owner of some of the world’s most luxurious properties, such as Canary Wharf in London and the Atlantis Hotel in the Bahamas.
Another excellent stock to take advantage of opportunities unavailable to individual investors is Brookfield Asset Management. For instance, the business just consented to pay for half of Intel’s $30 billion chip production facility. Another recent transaction involved the sale of 51% of Deutsche Telekom’s tower business to a consortium of investors that included Brookfield.
Over the following ten years, these opportunities will only grow. There is a massive megatrend worth trillions of dollars that is the shift to alternative assets. The long-term goal of management is to provide shareholders with 15% annualized returns. In line with the stock’s return over the past few decades, that will allow you to double your money in just five years.
Deals made by management benefit investors, but the stock’s high yield signals that the market is significantly undervaluing the company. Following the separation in December, Brookfield Asset Management issued a quarterly dividend payment of $0.32 per share, supported by the company’s distributable earnings per share of $1.28 in 2022. As management continues to develop and build assets, investors should expect higher earnings and additional increases in the dividend.
On that point, the company just had a strong year of fundraising, bringing in $93 billion of funds to invest, and management predicts another great year. The recent slump is a wonderful opportunity to buy shares before more asset growth and, presumably, bigger dividends propel the share price higher.