Contrasting Fortress Investment Group (FIG) and Brookfield Asset Management (BAM)

Fortress Investment Group (NYSE: FIG) and Brookfield Asset Management (NYSE:BAM) are both mid-cap finance companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, risk, dividends, analyst recommendations, earnings, institutional ownership and profitability.

Profitability

This table compares Fortress Investment Group and Brookfield Asset Management’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Fortress Investment Group 10.61% 38.79% 15.58%
Brookfield Asset Management 4.87% 2.10% 0.84%

Dividends

Fortress Investment Group pays an annual dividend of $0.36 per share and has a dividend yield of 4.5%. Brookfield Asset Management pays an annual dividend of $0.56 per share and has a dividend yield of 1.4%. Fortress Investment Group pays out 81.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Brookfield Asset Management pays out 43.8% of its earnings in the form of a dividend. Fortress Investment Group has raised its dividend for 5 consecutive years. Fortress Investment Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

40.2% of Fortress Investment Group shares are owned by institutional investors. Comparatively, 53.7% of Brookfield Asset Management shares are owned by institutional investors. 45.2% of Fortress Investment Group shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Volatility and Risk

Fortress Investment Group has a beta of 1.95, indicating that its share price is 95% more volatile than the S&P 500. Comparatively, Brookfield Asset Management has a beta of 1.03, indicating that its share price is 3% more volatile than the S&P 500.

Earnings and Valuation

This table compares Fortress Investment Group and Brookfield Asset Management’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Fortress Investment Group $950.66 million 1.84 $273.52 million $0.44 18.11
Brookfield Asset Management $30.02 billion 1.28 $8.47 billion $1.28 31.34

Brookfield Asset Management has higher revenue and earnings than Fortress Investment Group. Fortress Investment Group is trading at a lower price-to-earnings ratio than Brookfield Asset Management, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent ratings for Fortress Investment Group and Brookfield Asset Management, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fortress Investment Group 0 4 0 0 2.00
Brookfield Asset Management 0 1 7 0 2.88

Fortress Investment Group presently has a consensus price target of $6.00, indicating a potential downside of 24.72%. Brookfield Asset Management has a consensus price target of $43.56, indicating a potential upside of 8.58%. Given Brookfield Asset Management’s stronger consensus rating and higher possible upside, analysts clearly believe Brookfield Asset Management is more favorable than Fortress Investment Group.

Summary

Brookfield Asset Management beats Fortress Investment Group on 9 of the 17 factors compared between the two stocks.

About Fortress Investment Group

Fortress Investment Group LLC (Fortress) is an investment management firm. The Company operates through segments, including private equity funds, permanent capital vehicles, credit hedge funds, credit PE funds, liquid hedge funds and Logan Circle. Its business is to sponsor the formation of, and provide investment management services for, various investment funds, permanent capital vehicles and related managed accounts (the Fortress Funds). Fortress’s sources of income from the Fortress Funds are management fees, incentive income and investment income on its investments in the funds. As of December 31, 2016, the Company’s private equity business manages approximately $13.5 billion of assets under management (AUM); credit funds business manages approximately $18.1 billion of AUM; liquid hedge funds business manages over $4.6 billion of AUM, and Logan Circle business manages approximately $33.4 billion of AUM.

About Brookfield Asset Management

Brookfield Asset Management Inc. is an alternative asset manager. The Company operates in eight segments. The Asset Management segment manages its listed partnerships, private funds and public markets on behalf of its clients. The Property segment includes the ownership, operation and development of office, retail and other properties. The Renewable power segment operates and develops hydroelectric, wind power and other generating facilities. The Infrastructure segment includes the ownership, operation and development of utilities and agricultural operations, among others. The Residential development segment includes homebuilding, condominium development and land development. The Service activities segment includes construction management and contracting services and property services. The Private equity segment includes the investments and operations overseen by its private equity group. The Corporate activities segment includes the allocation of capital to its operating platforms.

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