Key Points
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Brookfield trades near its 52-week low despite record fundraising and double-digit earnings growth.
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Alphabet’s cloud backlog jumped to $561 billion last quarter, but heavy AI spending has pushed free cash flow negative.
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Both businesses are built for investors with long time horizons.
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The best long-term investments often look uncomfortable in the short term, but it’s important to look at investing through a long-term lens. In today’s market, there are some excellent businesses trading at significant discounts relative to their recent highs, yet still have incredible long-term potential.
In this article, I’ll discuss two stocks that stand out in this category. Both are investing aggressively to build their future businesses, but have been held back by investors punishing them for short-term headwinds or macroeconomic conditions. Full disclosure: I already own both of these stocks in my portfolio, but if current prices hold, I plan to buy even more.
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Asset management and so much more
The first stock is Brookfield Corporation (NYSE:BN), which trades close to the roughly $42 average price at which the company has been buying back its own stock this year. It’s a very reasonable price for a business that’s growing as quickly as it is.
In the second quarter, Brookfield’s distributable earnings before realizations grew 15% to $0.61 per share. Its asset management arm raised a record $77 billion, and fee-bearing capital, the money that generates recurring management fees, grew 19% to $672 billion.
Brookfield also has several long-term growth engines. It’s planning a $100 billion AI infrastructure facility in Kentucky, its Westinghouse business has 14 nuclear reactors under construction, and its Wealth Solutions business, which has more than $190 billion in insurance assets, is targeting more than $300 billion by the end of the decade. With about $210 billion in capital available to deploy, Brookfield has plenty of ways to grow.
However, to make a long story short, the elevated interest rate environment is a negative headwind for commercial property values, which has created a somewhat depressed stock price. Brookfield trades for about 15% below its 2026 peak, and for about 13 times expected forward earnings per share.
The cheapest stock in the Magnificent Seven
Google parent company Alphabet (NASDAQ:GOOGL) grew revenue 25% in the third quarter, to $127.6 billion, and its cloud business is the main reason I’m excited about the company over the next decade. In the quarter, Google Cloud revenue more than doubled to $30.7 billion, and its backlog climbed to $561 billion, up from $514 billion just three months earlier. Even search, the business many investors worry that AI will disrupt, grew 12%.
Of course, spending is the reason the stock fell after the report. Alphabet spent $51.4 billion on capital expenditures in the third quarter alone, which pushed free cash flow to negative $9.1 billion. Management expects $195 billion to $205 billion in capex this year, with a significant increase in 2027. Some analysts have estimated 2027 capex as high as $300 billion. That’s understandably made some investors nervous.
On the other hand, much of Alphabet’s spending is already backed by demand. The $561 billion cloud backlog represents revenue customers have committed to, and search and YouTube still generate enormous amounts of cash to help fund the build-out. If you judge Alphabet by this year’s free cash flow, you’ll see a problem. But if you consider where Google Cloud could be by 2035, you might see things differently.
It’s worth noting that Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB) seems to like what it sees. Berkshire added about $4.5 billion in Alphabet stock in the second quarter and invested another $10 billion through a private placement, making Alphabet its third-largest stock holding. With shares trading at 30% of the May 2026 highs and at 22 times forward earnings, I wouldn’t be surprised if Berkshire buys even more.
Why hold through 2035?
Both companies are making investments that won’t fully pay off for years. Brookfield’s data center, nuclear, and insurance businesses are built to compound over decades. And Alphabet’s AI spending only makes sense if you’re thinking about where cloud computing and AI will be in 2030 and beyond. If you’re judging these businesses quarter by quarter, the spending looks like a problem. If you’re thinking in terms of decades, it looks like an opportunity. Ten years is also long enough for compounding to do the heavy lifting. A business that grows its earnings by 12% a year roughly triples them in a decade.
The bottom line
Neither of these stocks is risk-free. Brookfield is complex and uses significant leverage. Alphabet’s AI investments may take longer than expected to pay off. However, both are run by management teams with long track records of allocating capital well, and both trade at prices that I believe undervalue where they could be in 2035. I’d be comfortable adding to both if the current prices hold, and I don’t plan to sell either one for a long time.
Should you buy stock in Brookfield Corporation right now?
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Matt Frankel, CFP® has positions in Berkshire Hathaway and Brookfield Corporation. The Motley Fool has positions in and recommends Alphabet, Berkshire Hathaway, and Brookfield Corporation. The Motley Fool has a disclosure policy.
