Please ensure Javascript is enabled for purposes of website accessibility
Value Investor
Wealth Building Opportunites for the Active Value Investor

Cabot Undervalued Stocks Advisor Special Bulletin

One new stock joins the Growth & Income Portfolio, plus updates on three other stocks.

Blackstone Group LP (BX) joins the Growth & Income Portfolio, plus updates on Boise Cascade (BCC), H&R Block (HRB) and Schnitzer Steel (SCHN).

Today I’m adding Blackstone Group LP (BX – yield varies) to the Growth & Income Portfolio.

Blackstone Group is the largest and most diversified alternative asset manager. The company raises tens of billions of dollars from investors and deploys the capital into private equity, lower-rated credit instruments, hedge funds and real estate.

Blackstone has more than doubled its assets under management (AUM) since 2011, to over $350 billion, and is still growing. Importantly, the company is not suffering from investor withdrawals or poor performance, which has recently been an industrywide problem for its peers.

Blackstone’s fourth quarter 2016 performance came in above analysts’ estimates—$0.68 vs $0.64 EPS—due to higher-than-expected investment income and fee income.

Wall Street expects earnings per share (EPS) to grow 43.5% and 11.5% in 2017 and 2018, with corresponding price/earnings ratios (P/Es) of 10.5 and 9.4. While BX does not have a normal P/E range, it’s fair to say that the P/E ranged between eight and 16 during years of comparable EPS. The stock is undervalued.

Quarterly dividends vary as the company distributes investment income. If we annualize the last four quarterly distributions, the yield on the stock has most recently been 4.9%. The yield was higher in 2014 and 2015. Click here to see a recent record of quarterly distributions.

Here’s a sampling of Wall Street’s expectations for BX:

  • Credit Suisse calls BX its “top pick” among alternative asset managers.
  • Morningstar assigns BX a fair value of 37.
  • Morgan Stanley gives BX a 36 price target.
  • Standard & Poor’s—always the Eeyore of analyst reports—has a price target of 33.

BX could appeal to investors who seek income, growth and/or value. If you are keen on investing in real estate, BX is right up your alley, with over $100 billion invested in real estate. (You generally won’t see me recommending REITs, because their EPS and debt levels never meet my criteria. Therefore, I’m putting real estate enthusiasts on notice: BX is a rare real estate recommendation from me.)

Buy BX now. The price chart is bullish. BX could rise to price resistance between 38 and 39 before coming to a halt. Strong Buy.

Boise Cascade (BCC) looks ripe for a run-up to 32. Buy.

H&R Block (HRB) has surprising price strength right now. The stock could quickly rise to 27, where it traded a year ago. At that point, barring takeover prospects, I’d estimate that there’s a 100% chance that the stock will begin a price correction. Hold.

Schnitzer Steel (SCHN) February steel shipments rose for the second consecutive month, after almost two years of monthly declines in year-over-year comparisons. SCHN appears to have completed the downward portion of its price correction, and is likely heading back up now. I’m sorry for the volatility—these things happen! There hasn’t been any bad news, so it just seems to be a normal price correction among basic industry, energy and construction stocks. Strong Buy.