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Alternative Assets Boost Ares

04/03/2017 2:50 am EST


Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Based in Los Angeles, Ares Management (ARES) is a business development company (BDC) and one of the world's largest alternative asset managers, with nearly $100 billion in assets under management, suggests Mark Skousen, editor of High-Income Alert.

Ares invests primarily in credit instruments, private equity and real estate. This wide platform has allowed it to deliver high returns with broad diversification.

Much of this is due to Ares' flexibility. Because it invests in multiple asset classes, it can put the firm's capital to work wherever the opportunities are greatest. And it can invest in all levels of a company's capital structure to optimize returns while limiting risk.

This is what hedge funds often promise but seldom deliver. The proof of any management technique is real-world returns. And Ares is generating them.

In the most recent quarter, for instance, earnings per share soared several-fold on a 124% increase in revenue. Management is earning a healthy 24% return on equity. And this BDC enjoys a 15% operating margin.

No wonder the shares are up 33% over the last 12 months. And no wonder, too, that while hedge funds are hemorrhaging cash, Ares has raised another $14 billion from new and existing clients over the last year.

In this service, we always insist on getting paid while we wait for capital appreciation. And Ares has a 4.9% dividend yield, paid quarterly.

As net income rises in the months ahead, expect that dividend to increase. So pick up Ares Management at market. And place a sell stop at $15 for protection.

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