General: Brookfield Asset Management (BAM)

Brookfield Asset Management (BAM – 7.5%), a best in breed asset manager focused on delivering value to shareholders by producing increasing, recurring high quality free cash flow (beautiful isn’t it?). The recent pullback, due to concerns surrounding the credit, housing and commercial real estate markets, is providing us with what we believe to be nothing short of an incredible opportunity to buy into what we consider to be one of the preeminent wealth creation companies in the world today.

Run by Bruce Flatt (who is often referred to as a Canadian Warren Buffet...a quick look at his track record assures us that the comparison is not nearly as bold as it at first may seem), shareholders are in good hands. We can't think of very many people we would rather have allocating our capital in times like these.

BAM’s basic strategy is to opportunistically acquire and manage long lived assets, at reasonable prices, that generate sustainable and growing free cash flow, finance them with cheap debt and equity financing, and manage them actively to maximize total returns. Asset classes include commercial and residential property, financial assets, power generation and transmission, timberlands, and renewable energy.

In case you were wondering, BAM’s debt on the balance sheet is all non-recourse (making it a non issue as only 2.4B of it has recourse to the parent company) and its access to capital at attractive rates (as the last year has shown) is still intact. Notably, their 20 billion in permanent capital is a tremendous advantage today, as this debt does not come due, has no margin calls, and is not effected by the mark to market volatility that has beset so many other financial institutions as of late.

In what can only be described as one of the worst operating environments on record, BAM's operating cash flows have remained and in all liklihood will continue to remain robust and its capitalization and liquidity situation remains strong. Indeed, on top of their 3.5 Billion dollar cash hoard, Brookfield is on track to generate free cash flow from operations at or around the $1.5 Billion for the full year '08.

In today's environment where most companies are without access to financing, BAM's liquidity position is a tremendous competitive advantage, essentially placing them in the cat bird seat to opportunistically take advantage of others distress if and when sufficiently attractive investment opportunities arise.

Thanks to investor myopia and the extreme panic within the capital markets, we where able to initiate our position at a cost basis of roughly $14 (which is both a meaningful discount to current NAV and a gigantic discount relative to BAM's long term earnings power).