We last analyzed Blackstone before the markets began this period of heightened volatility back in February.
Since then, Blackstone's stock has largely followed the market as interest rates and the ongoing crisis in Ukraine have initiated all sorts of headwinds worldwide.
However, looking past the headlines to Blackstone’s actual business and their Q1 earnings report last week, we really like what we saw compared to the rest of the financial sector & market.
Blackstone has brilliantly positioned its fund to be uniquely able to weather higher interest rates and continued inflationary pressure.
This is going to be a year where investors have to pick individual winners in stronger industries. And as a fund/company, Blackstone has done an excellent job of doing just that.
Let’s get into it 👇
Blackstone ($BX) Overview:
This is the third time we’ve written about Blackstone in the last year.
We have and continue to like Blackstone for a lot of reasons. They’re an asset manager who invests heavily in real estate, private equity, venture capital, etc. Blackstone is attractive right now because they give people access to the private markets and other alternative investments that usually only the 1% have access to.
They also had incredible growth in Q1. They added over $30 Billion in assets to their AUM, which puts them on pace to pass $1 Trillion in managed assets this year.
Technically, they’re trying to be more aggressive than that even–working to pass adding $300 Billion more to their AUM this year. But we’ll see how that plays out.
Fund Composition is Everything:
But for funds like Blackstone, it’s not just their investments and their investor loyalty that matter, it’s the composition of their portfolio that’s huge too. Interest rates and other inflationary concerns can CRUSH funds like this. And it’s growth in the right kinds of assets that make us the most excited about Blackstone moving forward.
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Fee-paying AUM. This is the fastest-growing portion of the Blackstone fund since last quarter. These kinds of assets are really important to a fund because they’re consistently providing earnings for Blackstone, rather than waiting for a private company to exit or for any other maturation event.
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REITs. We’ve talked a lot about diversifying your portfolio with REITs, and it seems a lot of retail investors decided to listen to us. Blackstone's REIT fund is up to $2.5 Billion in subscriptions as of April 1st, 2022. Blackstone is a more conservative fund, and its diversified products are really paying off as more and more investors are moving out of high-growth plays and into more value strategies. REITs aren’t the only perpetual capital vehicles BX is working with, but they’re the most prominent.
- Strong Company Investments. Blackstone’s key investments in the private market are largely focused on companies with established revenue in high-growth sectors. Companies with proven revenue are going to be more attractive and better positioned for exits during a period where money today is potentially way more valuable than money tomorrow.
What's Next For The Stock:
Blackstone is sitting on about $130 Billion in assets they can commit, giving them a lot of agility to manage what is shaping up to be a pretty volatile year in the economy. This alone gives us a lot of confidence because Blackstone can continue to be measured and agile and go after opportunities that are better fitting for this market environment.
BX is just so well diversified that it’s easy for us to update our price target even when their Q1 results didn’t match growth from last year.
Another huge factor that can drive BX up is the current rumors that they could be included into the S&P 500 either by the end of this year or next year. Long-time readers may remember what getting included in the S&P 500 did for Tesla back in 2020. This may be a long shot though, but we’ll keep an eye on it.
Regardless, Blackstone continues to prove it’s one of the best-run funds on Wall Street, and one of the best-positioned financial stocks to power through the mayhem that is 2022.
Price Target: $175 (59% upside)
Current Price: $110
Target Date: Q2 2023
Rating: Overweight
Risk/Reward: Medium-High / High
Ticker: BX
Market Cap: $132B
Dividend Yield: 4.91%