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Analyst sees Brookfield stock doubling in five years

These are some of the key analyst actions on Bay Street today.

Europe's pain will be Brookfield Asset Management Inc.'s gain. And for patient investors in the stock, it could turn into a windfall.

That's the view of at least one analyst in the wake of several significant investments the company made during the second quarter that became possible because of distress in Europe. They include an office portfolio in London, toll-road investments in Chile and Brazil, and a gas connection utility in the U.K.

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More acquisitions appear to be in the pipeline. Brookfield has indicated that the next phase of its Europe-related investments could be to use its strong capital position to help European companies recapitalize their balance sheets. These companies would have high-quality "real" assets, but due to high debt levels and poor market liquidity, they have lost access to traditional sources of funding, noted Desjardins Securities analyst Michael Goldberg

All this has Mr. Goldberg feeling even more bullish on the stock, which he already rated as a "top pick."

"It may be on the verge of a further significant benefit from distress in Europe," Mr. Goldberg concluded in a research note. "More importantly, as noted by President and CEO Bruce Flatt, investor allocations to real assets -- BAM's niche as an asset manager -- are set to balloon over the coming decade. We agree with that view."

He raised his price target by $2 (U.S.) to $42, but suggests that may be conservative. "Just as importantly, we see BAM as a double in less than five years."

RBC Dominion Securities is also firmly in the bull camp. It raised its price target on Brookfield by $3 to $40 (U.S.) and reiterated an "outperform-average risk" rating. "Having spent years cultivating relationships and building its track record, now global uncertainties, excess leverage and the passage of time are bringing an ever greater number of opportunities," analyst Neil Downey commented.


Altus Group Ltd.
Shares in Altus Group have soared about 175 per cent since November of 2011, as the company successfully executed a de-leveraging and operation improvement strategy. Given those gains, CIBC World Markets analyst Alex Avery believes it's now time for investors to be more cautious on the stock, downgrading it to "sector performer" from "sector outperformer."

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Upside: Mr. Avery maintained an $8.75 price target.


Calloway REIT
Investors can continue to expect stable and steadily growing cash flows from Calloway REIT, as well as possible distribution increases next year, said TD Securities analyst Sam Damiani. Calloway has also reported that none of its Rona store properties are within 15 kilometres of an existing Lowe's store, reducing the risk of additional closures in the event the two retailers merge.

Upside: Mr. Damiani raised his price target by $4 to $32.


Penn West Petrolum Ltd.
Canaccord Genuity analyst Brian Kristjansen has tempered his forecasts for Penn West Petroleum after the company announced it is curtailing its capital spending program and production outlook. But he's encouraged by the company's plans for asset sales, which will reduce debt and eventually provide a catalyst for the stock.

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Upside: Mr. Kristjansen cut his price target to $16.25 from $19, while reiterating a buy rating.


SunOpta Inc.
SunOpta has been working diligently to increase the trajectory and predictability of earnings growth and has been making gradual progress. Yet, its shares have drifted down toward book value. "While we see no urgency, the risk/reward is beginning to look interesting," said Desjardins Securities analyst Keith Howlett, who upgraded the stock to "buy-above average risk" from "hold-average risk."

Upside: Mr. Howlett raised his price target to $6.50 (U.S.) from $6.00.

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More


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