Blackstone Group LP (BX)

One of the leading asset managers in the world. You are investing with some of the brightest people on Wall Street. It is cyclical and will ebb and flow with the markets. It will be very volatile. They create long term value, however.

(Market Call Minute.) Wonderful capital allocators, but LPs are very hard to buy for Canadians, and can cause a whole bunch of tax problems.

A great company. It was a disastrous stock pick for him a year ago, and hasn’t done well. If you are looking for this to return to profitability, it is going to be at least 6 months. He doesn’t see a quick and easy resolution. We are going to be in this kind of marketplace for the next year or so. Unfortunately, in this kind of an environment, an asset manager like this is going to struggle. However, metrics are great and the valuation is cheap. Trading at a very strong discount to BV. Unbelievable dividend yield.

The largest alternative asset management Company globally. They are in 4 businesses. Private equity, credit, real estate and hedge fund solutions. Run by some of the most successful, smartest, best dealmakers on Wall Street. When you own the stock, it is not for the dividend, which goes up and down with the markets, but to make money on some of the smartest guys in town. If the IPO market starts to open up, it will be good for this company. If buying this for a stable dividend, it is not the company for you. They cut their dividend after Q1 by 54%.

(A Top Pick May 6/15. Down 25.98%.) He really likes this name, but it hasn’t worked out all that well. Had thought the market was going to do far better than what it has. This is a company that is highly dependent on being able to take companies public in a strong capital market. Very attractive and very cheap. Has a high yield of 3.9%.

Has gone down quite a bit over the last 6 months or so. Somewhat interest sensitive so will be a beneficiary of rising interest rates. A really well-run company. One of the leaders in investing in real estate, which he thinks is still a good asset. Also, have hedge funds and a debt business. They have 2 sources of revenue; fee-based revenue that they generate and performance revenue. He is looking for a lot of upside on the performance revenue. Dividend yield of 6.79%.

It would be subject to withholding tax from the US even in an RRSP. He sold earlier this year. You can’t see as well into their holdings. In this environment with companies that are deal dependant you need to see a couple of quarters of earnings. It is not a safe place to hide.

The alternative asset management space. There is a time to invest in individual companies and times not to. This is large and well diversified, but very hedge fund oriented. Buy this one when the group is on sale. This is not the time to jump on this one. There is no momentum in the story. Wait until they are harvesting their assets.

Well managed. They are in the business of making investments in the real estate space. They pay out a large portion of their earnings to shareholders.

(Market Call Minute) Money is coming out of many energy managers. This one is one of the unintended consequences. Until you see an improvement in the markets don’t step in.

An interesting company. Have about $280 billion of assets. It is a pure play on the financial industry. They manage private equity groups, mezzanine financing, senior debt offerings, etc. Heavily related to the real estate market. They have done well. Have about $45-$50 billion in their war chest. It is a limited partnership and there are tax ramifications for Canadians.

An alternative asset manager. They do real estate, fund to funds in the hedge fund space, private equity, credit funds, etc. The real estate credit funds have been up with over 15% internal rate of returns since its inception. This is a cash flow machine. Have been launching new products. Have been raising money and raised over $90 billion in the last 2 years, more than the 4 largest competitors combined. Offers relatively good liquidity for an alternative asset manager, which makes them more attractive. Thinks there is another 20% or so to go on this.

She likes the private equity space. It has been a great environment. She prefers KKR right now because it has lagged performance. 8.5% yield. They are selling some assets into the strength of the market at present.

Phenomenal company. You want to be in these private equity companies, and this is a preeminent name. They are hugely sensitive to the stock market. Economic data in the US is currently very strong. Private equity companies invest in the down market and raise money in the up-cycles and harvest in the up-cycles. An attractive company with a very strong pipeline. (See Top Picks.)

Private equity companies are enormously profitable and really cheap because the difficulty is that it is really “deal flow” (?) for them. They cash in on some of their private equities. When you have a strong market like we have had over the last couple of years, you can float stuff off. There have been a raft of IPOs at very good valuations, and the private equity guys have been raking in even more, which is why they are at low valuations. This is probably not the right time to be in any of them.