KKR & Co. LP (KKR)

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.

(Top Pick Apr 14/14, Up 16.09%) It is her preferred private equity group. They have a large balance sheet of their own capital that they are investing along with that of clients. They have some proven performance with a fund they have created and are about to launch a second one. It is a strategic way of funding new products. Management’s own capital is put into investments. She thinks there is some catching up to do right now.

Has been flat for bit now. They had strong realizations as they sold off businesses and now it is a question of what is next. She sees a very good underlying yield to the story. They had some energy exposure that was marked down this past quarter. She likes the management team. There is quite a bit of opportunity for them.

Recent earnings were a bit disappointing. They missed consensus estimates. The prospects for a company like this are very strong. Overall, he is looking for the S&P to do around 12%, maybe even 13% this year. An alternative asset manager like this one has so many legs.

Excellent business and an excellent company, but he can’t understand how, as a private investor, you can actually make money longer-term, because it is a heavily contractually driven business and they constantly have to accumulate capital. The capital is accumulated for up to 12 years, and then it can disappear. The dividend is being paid off the amount of capital being played, so if the capital falls the dividend could be at risk. There is no visibility as to what is going to come off the dividend stream. This is more appropriate for institutional investors.

They are turning a lot of their assets over, which is a good indication that we are in a pretty healthy market. They manage about $100 billion. Trading at about 1.6X Book, which is a little bit pricey for a financial company like this. A limited partnership. Taxation rules on US limited partnerships are quite punitive to Canadian investors. To recover, it requires quite a bit of paperwork, so get some tax advice if you are thinking about it.

The payout on this is high currently, but it is not a recurring thing. Part of the distribution they pay is a formula they do and it will fluctuate. If you own, you should receive some tax forms in the mail so you can get the deductions back.

9% dividend. Very well known alternative asset management / private equity firm out of the US. They have been around for a long time and are well regarded. This is the public part of their business. They manage hedge funds, private equity funds and so earn higher fees. They have a better growth outlook than others and so he would recommend holding on to it.

A private equity company, along with asset management business. One of the greatest sweet spots they can ever be in because they are funding very cheaply. They buy businesses, lever them up and then either bring them public or dispose of them to somebody else. Also, pays a great dividend yield. Capital is easily accessible for them, so when they open up new funds, they get lots of money in. A very, very positive environment.

Private equity. A phenomenal company. If you believe that markets are turning healthy and that the correction is behind us, you want to be in this alternative space. Has roughly half of its value on the balance sheet, so there is a lot of security. 30% of their business didn't exist 2 years ago and has yet to start earning meaningful fees. Yield of 8.01%.

It is hard to ignore the 9% yield, and he thinks it is pretty safe for the next couple of years. Have a number of new assets under management. Have some deals that will come to fruition that they will pay out to the unit holders. This is a great opportunity.

A lot of private equity players sold off last week. They are high beta plays on higher equity markets. If you are sitting on a pile of cash, this sector has been receiving more investment recently. Their exit strategy for any investment gets foiled with this sell off. He prefers Blackstone because they are more diversified.

Private equity firm. The yield is ~12% and nothing yields that high. He does not follow the company.

This should be able to grow its investment portfolio by 18% over the next couple of years on an annualized basis. Raised money in 2006 in its Asian fund and is starting to harvest that. Very geared towards the overall market and the markets have done really well, particularly in the US. They are launching money now with a European fund. One of the things in Europe is buying distressed debt.