Today’s news: Blackstone Group’s (BX) Investor Day causes share price to surge.
Blackstone Group (BX – yield 5.6%), an alternative asset manager, held an Investor Day on September 21 for the first time in four years. The presentation and webcast are quite impressive. Blackstone Group is thriving, and here are just a few of the key points:
• Assets under management (AUM) are $439 billion, and expected to reach $1 trillion in about eight years.
• Blackstone Group finances its projects with cash investments from professional investment entities, such as pension funds. Therefore, Blackstone Group operates with only a tiny percentage of debt, currently holding $1.7 billion more cash on hand than debt on the balance sheet. The company carries an A+ credit rating from the major rating agencies, higher than those of its industry competitors.
• Management is actively considering altering its corporate structure. Impressed by the investment market’s response to competitor KKR’s (KKR) 2018 conversation from limited partnership to C-Corp (at the new lower corporate tax rate), Blackstone is considering a similar conversion. Benefits of the conversion include expanded share ownership through mutual funds and inclusion in stock market indexes, which could boost investor demand.
• BX has the highest dividend yield of the largest 150 U.S. companies.
• The biggest risk to company performance is that an economic recession could delay Blackstone’s ability to sell properties/investments in a timely manner or for an optimal price.
The share price peaked near 35 in May 2015, and did not surpass that price until July 2018, so the current run-up has really just begun. BX rose above 40 this morning, and I expect it to continue rising for many months due to corporate successes, low valuation, a surge in institutional research that generates buying activity, and certainly upon any further news of a potential C-Corp conversion.
Don’t worry if there’s a pullback in the share price. I expect pullbacks to be brief, and not be representative of a bearish price chart. Use any such opportunity to accumulate more shares and lock in a slightly higher dividend yield. Buy.