I'm Buying These 2 Stocks Before Earnings - Here's Why
Summary
Daniel discusses his recent portfolio adjustments, primarily focusing on trimming Brookfield Corporation (BN) to invest further into Brookfield Asset Management (BAM), and actively adding to his Amazon (AMZN) position. He highlights the rationale behind these decisions, emphasizing value shifts and future growth potential.
He first explains his decision to trim his stake in Brookfield Corporation (BN).
His primary focus for reallocation is Brookfield Asset Management (BAM).
Finally, Daniel explains his continued accumulation of Amazon (AMZN) shares.
Mentioned Stocks
Reasoning: Daniel is actively buying Amazon (AMZN) shares, believing the stock is undervalued despite trading near all-time highs. He argues that Amazon's share price has underperformed the underlying business growth for the past five years and the business is re-accelerating significantly, especially with its involvement in AI. Amazon's planned $25 billion investment in Anthropic, coupled with Anthropic's commitment of over $100 billion to AWS over the next decade and securing 5 gigawatts of AWS data center capacity, highlights AWS's strong position in the AI infrastructure. Daniel also notes Intel's warning of a significant CPU shortage, which he believes will benefit Amazon's Graviton CPU chips, a $20 billion annualized revenue business growing at triple-digit rates and purpose-built for agentic AI workloads (Meta is a major Graviton customer). While analysts project 26% annual operating cash flow (OCF) growth for Amazon over the next three years (to $284.9 billion by 2028), Daniel's more conservative DCFs still show strong potential. With 16% annual OCF growth and a 20 price-to-operating cash flow (P/OCF), his DCF indicates a 14.4% CAGR over three years. A slightly more optimistic DCF with 18% OCF growth and a 22 P/OCF projects a 20% CAGR, suggesting a fair value of $337 per share. He points out that Amazon's current P/OCF of 20 is historically low compared to its long-term average of 26.4 and median of 26. Daniel considers Amazon one of the clearest and most undervalued ways to gain exposure to the AI boom, contrasting it with expensive semiconductor and utility stocks. He explicitly mentioned adding to his Amazon position.
Reasoning: Daniel decided to trim his position in Brookfield Corporation because he believes the value relationship has shifted, making Brookfield Asset Management (BAM) a more attractive investment. While his DCF for BN projected a respectable 16.9% compounded annual growth rate (CAGR), he found BAM's potential returns more compelling. He had previously rotated into BN from BAM in October 2024, but now sees more value in BAM at their respective prices.
Reasoning: Daniel actively added to his Brookfield Asset Management (BAM) position, rotating capital from BN, because he believes it offers superior value. His conservative DCF for BAM projected a 17.4% CAGR with a 25 P/E ratio, but he argues this is conservative as BAM historically trades above 30x earnings. With a 30 P/E, his DCF yields a 21.19% CAGR over the next 5 years. BAM is a highly profitable business with a 61% fee-related earnings margin and a 57% net margin. It returns 95% of its earnings as dividends, currently yielding 4.4% and projected to grow by over 15% annually. Daniel maintains his '4% BAM rule,' finding the stock interesting when the dividend yield is above this level. The company reported record Q4 2025 earnings, capital raising, deployment, and monetizations, with fee-related earnings up 28% and distributable earnings up 18%. BAM also increased its long-term annual earnings growth target to 20% over the next 5 years, making Daniel's initial 17% growth DCF appear pessimistic. Daniel notes strong demand for Brookfield's critical infrastructure assets and positive signs from competitor Blackstone's infrastructure segments, indicating a robust environment for BAM's business model. He explicitly states he bought more shares, especially in his retirement portfolios.