Private equity firms like Blackstone (NYSE:BX) have been thriving recently, especially since so many wealthy investors are looking to take advantage of alternative investments in a low-interest-rate environment. This has led to massive inflows and plenty of new capital available for the company to put to work, evident in the fact that Blackstone deployed more than $37 billion last quarter and has made a record amount of total new investments for the year at this time.
If you aren’t familiar with alternative investments, it’s a term that refers to financial assets that don’t fall under the conventional categories like stocks, bonds, and cash. They can include private equity, hedge funds, venture capital, real estate, and derivatives contracts, which are investments that are typically intended for institutional or accredited investors and can be difficult for many retail investors to access. Since Blackstone is the world’s leading alternative asset manager, it’s a great way to explore adding exposure to these incredibly lucrative investment opportunities.
Here are a few reasons why Blackstone stock is a buy at this time:
Yet Another Record Quarter
With so much uncertainty regarding this round of earnings season and how different companies are being affected by factors such as supply chain bottlenecks, it’s great to see Blackstone deliver another record quarter. The company’s Q3 report continues a stellar year for the New York-based private equity firm and should give investors plenty of confidence that the company is heading in the right direction going forward. Blackstone’s Q3 distributable earnings, which is a measure of the company’s income that can be returned to shareholders, jumped to an all-time high of $1.64 billion, up 108% year-over-year. The company was able to deliver such strong earnings thanks to record management fee revenues and realized performance fees from several asset sales.
Blackstone CEO Stephen Schwarzman stated:
“Today, Blackstone reported the best results in our 36-year history. Earnings increased dramatically, and all of our key financial and capital metrics reached record or near-record levels.”
With this kind of performance, it’s easy to understand why the stock has rallied over 104% year-to-date. Investors should expect more of the same from Blackstone going forward, particularly since the company continues to aggressively pursue deals in high-growth areas like IT services, logistics warehouses, and software.
Let’s Make a Deal
Adding shares of Blackstone essentially means you have a team of financial experts hunting down undervalued assets and making deals to generate returns for your portfolio. The company is known for delivering excess returns and has been spending big recently, which could mean strong earnings growth over the next few years. Look no further than the company’s recent sale of The Cosmopolitan hotel and casino in Las Vegas for $5.65 billion, which was the firm’s most profitable single-asset deal ever, for proof of Blackstone’s world-class deal-making abilities.
Other deals during Q3 included a $5 billion deal to purchase Chamberlain Group LLC, which is the manufacturer of LiftMaster garage-door openers, a move to purchase data-center operator QTS Realty), and acquisitions of Home Partners of America and CityCenter Las Vegas. Blackstone also recently announced that it is buying a majority stake in womenswear brand Spanx, rounding out a diverse list of recent deals. There aren’t many companies out there that can offer this type of business expertise and exposure to so many different industries, which is a strong reason why Blackstone is worth a look.
Huge Inflows Point Towards Strong Demand
Blackstone reported another big jump in assets under management in Q3, as the company saw inflows of $46.7 billion during the quarter. The company’s total AUM increased to $730.7 billion, up 25% year-over-year, and confirms that investors are counting on Blackstone to generate outsized returns with interest rates near 0. If so many wealthy investors are looking to park their capital with Blackstone, shouldn’t retail investors be interested as well?
It’s also worth noting that Blackstone is benefitting from strong investor demand thanks to its insurance deals, which can generate more earnings over the long term since they aren’t market-dependent. There’s also a lot to like about how the firm’s private equity fund has performed, as it returned 9.9% in Q3 versus a 0.23% return from the S&P 500 index during the same period. With so many things working in Blackstone’s favor at this time and plenty of demand for alternative investment vehicles, adding shares after the company's latest earnings release makes a lot of sense.