Blackstone’s Conference Call Reassures Shareholders

Is the stock market underestimating the earnings power of Blackstone Group? The ongoing conference call is a well orchestrated affair, and highlights Blackstone’s (BX-NYSE) growing business lines and financial discipline.

Sure, they will be known as a private equity shop for the foreseeable future, but they are building out many business units, and will soon have a significant presence in hedge fund of funds and internal hedge funds. They are continuing to build our their international efforts as well, including an Asian team that was recently recruited from SAC.

And while their LP’s are taking markdowns, they are winning me over with candid remarks, a stark contrast to the manner in which Fortress Investment Group handled their recent earnings release and call.

Blackstone will be opportunistic, and have largely been sitting on their hands waiting for the credit crisis to run its course. The decline in the value of its stake in Deutsche Telekom accounted for the lions share of the bad news, although a decline in the value of real estate hurt results.

Still, many of Blackstone’s units are outperforming their relevant benchmarks and competitors, and the current environment on Wall Street should allow them to hire the people they want on their terms as the firm morphs into an alternative asset management operation that looks much different than the traditional vanilla mutual fund shops like Janus or Legg Mason, or the sellside.

Stephen Schwarzman let Tony James handle the conference call, but his formal comments sum it up:

“Turbulent markets throughout the world persisted in the first quarter, affecting virtually all asset pricing across credit and equity markets. This was both good and bad for us. On the one hand, it meant lower carrying values of some of our investments in the short term and restricted our disposition activity. On the other hand, purchase prices for new deals declined, opening up many interesting investment possibilities. Credit market dislocation, while limiting availability of debt for large leveraged transactions, has also created attractive debt investment opportunities, particularly in leveraged loans. Our well-timed GSO acquisition dramatically expanded our efforts in this area. Despite the challenges presented by a slowing global economy, overall our portfolio companies and real estate investments continued to perform well. Our balance sheet remains healthy, and our long-term contractual management fees position us well to increase market share.”

Blackstone is growing its assets under management in a tough environment, and with dry powder available, the days of picking on their stock might be over. Getting too granular in your analysis in unlikely to pay dividends; there are many moving parts to the story and you can find something you will not like. But the long side of Blackstone’s stock is probably the place to be if you believe they will continue to methodically grow their business and assets under management.

The hype over their IPO was silly, but you now have your chance to get in bed with Steve, at 50% of last year’s sticker price.

Not only that, but they are hiring.

Yes, unlike May of 2007, now there is a little bit for everyone at Blackstone as they take advantage of their hobbled competitors and financial flexibility.

And although I have been skeptical of the possibility of a Citadel IPO, another 5 points in BX and OZM and I will entertain the possibility, as a lift in the comps is a prerequisite to Ken Griffin joining the ranks of publicly traded alternative shops.

The Blackstone Group Reports First Quarter 2008 Results
Business Wire
----------------------------------------------------------------------------------------------------------
The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Position

Comments:

<< Back to main