Blackstone Group: Alternative Assets and Private Equity

02/13/2019 5:00 am EST


Crista Huff

Editor, Cabot Undervalued Stocks Advisor

Blackstone Group LP (BX), the world’s largest and most diversified alternative asset manager, is a strong buy, asserts Crista Huff, growth and income expert and editor of Cabot Undervalued Stocks Advisor.

The company reported fourth quarter non-GAAP economic net income (ENI) of $0.067 per diluted share this morning (according to my calculations) when the market was expecting $0.05. (This number was not itemized within the press release. I calculated it from numbers on the financial statement so it could be off slightly.)

As a reminder, limited partnerships operate somewhat differently from most corporations. Quarterly economic net income (ENI) is not really comparable to earnings per share (EPS), and quarterly distributions vary each quarter, as opposed to the predictable sameness of quarterly corporate dividends.

Blackstone Group’s next quarterly distribution will be $0.58 per share, bringing the trailing 12-month total distribution per share to $2.14. The current yield on the stock, based on yesterday’s closing share price of $33.14, is 6.5%.

The company reported fourth quarter 2018 inflows of $38.6 billion, and full year inflows of $101.1 billion, bringing total assets under management (AUM) to $472 billion. Blackstone repurchased $542 million of stock during the year, with $458 million remaining in its repurchase authorization.

Many of Blackstone’s eight investment strategies—within the categories of real estate, private equity, hedge fund solutions and credit—were affected by poor fourth quarter investment markets, with various strategies’ quarterly performances ranging between up 5.1% to down 7.3%.

For the full year, all of these strategies produced positive returns except distressed credit, down 3.2%. All three private equity strategies produced double-digit returns, at an average growth rate of 16.6%.

BX is an excellent stock for dividend investors. In addition, speculative investors have an opportunity for outsized capital gains if BX converts from an L.P. to a C-corp., which management is currently contemplating. I would be very comfortable buying BX now.

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