KKR & Co. LP (KKR)

They harvest well, but a lot of it is priced into the market. He would stand aside. This is the wrong part of the cycle for them.

Sell for tax loss and buy back within 30 days? This had a big break downward this year after a bunch of years of basing, but has found support at around $17. He would take the tax loss, and then look around for a name that would be similar in case you want to stay in that space.

We are in the season of tax loss selling. A well-run company, however this is the kind of company where there is a very specific time to own it, and a time not to own it. Coming out of a crisis is a great time to own a company like this, and we are currently at the top of the cycle, and we need another crisis for them to go buy more and then turn around and monetize. You can hang onto this and watch, but there are better times in the cycle.

A private equity company. They invested in some oil properties that have done poorly in the last little while. Pays a good dividend which is pretty safe, because it is just a payout of their earnings from their business. Although interest rates are going up, they are still relatively low, and this company can still buy things and lever them up. The M&A and stock market continues to be fairly robust.

The company suffered because of a couple of major positions it has taken in the oil/gas industry. However, the rest of their business is still very, very solid. The distribution is not a dividend, but more of a distribution based on what they earn on some of their various funds. Relatively very solid. Might come down a little bit this quarter, but you are getting a decent yield. It is a very smart bunch of guys running this business.

Selling at about 1X his adjusted BV, which makes the stock fairly reasonable. It is sitting right in the middle of a long-term range with a top of about $25 and a bottom of about $12. Yield of nearly 10%.

(A Top Pick Oct 29/14. Down 13.48%.) A very cheap name and he thinks his thesis for buying it was correct. Still thinks and maintains that markets will be higher in 12 months. If that is the case, then you want to be in very inexpensive financials that are leveraged.

They are very talented investors. They have a good long term track record. They recently lost a lot of money in a partnership in oil and gas investments. It has affected their performance. Other than energy, they have had a very successful track record. What he does not like about this is the lack of transparency. He thinks the management pay themselves too well.

This is a good group to look at. The big challenge is performance fees and their ability to generate them. They monetize private investments and charge fees. In bad markets they tend to sell off. This one is down 35% from the peak. The numbers are not that great year over year. The revenue growth is flat. What he does like is the reasonably healthy cash flow and the buildup in cash on the balance sheet. The stock price is a massive discount to their book value. He would go for this here, but he feels the market is discounting a dividend cut. 9.6% yield. The group as a whole looks undervalued. You will probably see a recovery in these names in January.

(Top Pick Oct 29/14, Down 20.16%) Energy has sold off quite a bit and that has not helped them. If markets have a rally toward the end of the year, they should do well. It is not expensive. China and the Fed are the main things driving it.

This is very range bound and very sideways. It looks like $17-$18 is support. As long as that is held, you can consider this is still in the range. It might be okay to buy if it bounces off of the bottom.

He really likes the alternative space. KKR is a little more leveraged and a little more proactive on the use of their balance sheet. What they do, they do very well. However, in 2014 they made some energy investments which left “egg on their face” for that. Broad very diversified portfolio. Give it time, let the market shake it out. When it starts to turn in the next cycle. That is when you want to own it.

(A Top Pick Sept 19/14. Up 4.45%.) Reduced some of his position. One of the issues is that they have a fair bit of exposure to energy investments. One of the more recent investments went bankrupt. This is the cheapest alternative asset manager and are really well poised if we see a return to stronger markets. Inexpensive, but prefers Blackstone Group (BX-N).

Think of the dividend as a distribution. It is a payout on 3 things. If they monetize investment and realize a performance bonus on it, that is one, and she expects that to continue. There are 3 ways to value this stock. You have 1) the value of your balance sheet assets, 2) the fee they earn off of managing other people’s monies and 3) if they do well managing other people’s monies and go above their return hurdles, they get paid even more. She thinks there is quite a bit of upside on the story. It has been selling off in the last few days. With China, there have been credit spreads widening out a little and people consider it as a bit of a spread business. She thinks it is going to break out of this trading range it has been in.

This had a great couple of years in 2012-2013. Has gone flat for the last 18 months or so. However, it pays a very high distribution.