Undervalued Stock #1: Blackstone Group LP (BX)
Blackstone Group LP (BX) raises capital for, invests in and manages private equity, real estate and hedge funds. The company’s revenue and earnings vary wildly from quarter to quarter, depending on gains and losses from asset sales and fees earned. Blackstone is a limited partnership and reports income and expenses on IRS Schedule K-1 sent to investors after each year-end.
Blackstone has been actively selling some of its major real estate holdings, with a focus on hotels, to institutional investors in China. These sales will generate substantial revenue and earnings in 2017. Revenue will likely advance 19% in 2017 and EPS (earnings per share) will jump 30%. Blackstone’s superior investment returns are attracting substantial capital inflows, driving assets under management significantly higher.
At 12.3 times current earnings, BX shares are clearly undervalued. Blackstone’s dividend yield stands at 7.8%, which is very attractive. Earnings will receive an additional boost if interest rates rise, inflation increases, or financial regulations are eased by the Trump administration. Buy.