What are you buying today?

[StevieV]

6 hours ago, n.r98 said:

Thinking of initiating a position in $CG at some point to play the alt inv space. 

 

Why CG?  Seems like perhaps the cheapest but most uncertain among the big alts.

[n.r98]

1 hour ago, Stuart D said:

Nice!

I’m surprised this name doesn’t get more airtime. If the deal closes won’t they have more cash than market cap? Plus management previously said they would use the proceeds to buyback stock.

 

Yes they will. Stub co at 10x EBITDA yields $90 + share price as upside. 

 

Management guiding to 500m+ (inc 350m break fee) of cash inflow if deal breaks. But leverage is quite heavy here so a turn of EBITDA is equal to around $15 of stock price value so downside can be gnarly esp in current tape where market doesn't know how to capitalize earnings of these retailers; hence call options. 

Think their structural remedy case is q strong on variety of merits - have a look at this merger between UNH and Change where the DOJ lost. Assa has been doing roll up for years and used incisive language - DOJ is irrational and posturing; and Assa actually paying a hefty premium here (analysts were criticizing the multiple paid, a year back), so this isn't immediately accretive to the stock unlike for SPB. So their strong words really makes one go hmmmm
https://www.paulweiss.com/practices/litigation/antitrust/publications/takeaways-from-the-doj-s-unitedhealth-change-healthcare-merger-loss?id=44360

 

Edited February 6, 2023 by n.r98

[n.r98]

22 minutes ago, StevieV said:

 

Why CG?  Seems like perhaps the cheapest but most uncertain among the big alts.

Share price slightly stale but yeah, market seems to be implying that i) CG's BVPS is overstated (maybe too much exposure to CLO (?) ii) FRE is not worth a teen multiple.

 

But for i) if you discount BV by 50%, CG still trades at like 12-13x FRE. ii) So big qn is why the FRE trades here esp with mgmt guiding to 15% CAGR on it + room for margin expansion.

 

Sell side relentlessly belabors how cheap the stock is on the calls. New CEO has been announced so that should remove a leadership overhang. Re margins having room for improvement - currently theyre at 36% margins and theyre pushing for 40. BX sports 50+% and KKR sports 60%. Ares sports 40+%. Obv different type of AUM garners diff kinds of margins but seems like a nice r/r with lowest multiple + lowest margin. And they've actually expanded margins by 15+% over the last 5 years. But still doing more work.

[StevieV]

CG has filed an 8K about the new CEO's compensation package.  110% price appreciation in 5-years for the top incentive.

 

https://capedge.com/filing/1527166/0001527166-23-000007/CG-8K

 

 

[StevieV]

Carlyle Group (CG) reported this morning and is down pretty hard in the first couple minutes.  I haven't looked closely at the earnings yet, but $4.34/share in Distributable Earnings (DE) for 2022.  That is probably a bit of a cyclical high.  Let's say very, very roughly normalized to say $3.5/share.   On a $35 share price that's 10x normalized DE?  Certainly a very undemanding valuation.  We'll see what the new CEO can do.

[Saluki]

Added a little more SWBI on the dip.   Currently only 1/2 a position for me, but my cash is fully deployed  

[Red Lion]

3 hours ago, StevieV said:

Carlyle Group (CG) reported this morning and is down pretty hard in the first couple minutes.  I haven't looked closely at the earnings yet, but $4.34/share in Distributable Earnings (DE) for 2022.  That is probably a bit of a cyclical high.  Let's say very, very roughly normalized to say $3.5/share.   On a $35 share price that's 10x normalized DE?  Certainly a very undemanding valuation.  We'll see what the new CEO can do.

I think cg is a good buy here. Personally I would rather own apo and kkr even at a higher valuation, but I think cg has the most upside if they can steadily grow aum and move margins in line with their peers. So far they haven’t done either one, but maybe the new ceo will help. 

[Spekulatius]

Added to $CNC and just a bit to $BTI

[Intelligent_Investor]

Oaktree buying Adani bonds

[StevieV]

6 hours ago, RedLion said:

I think cg is a good buy here. Personally I would rather own apo and kkr even at a higher valuation, but I think cg has the most upside if they can steadily grow aum and move margins in line with their peers. So far they haven’t done either one, but maybe the new ceo will help. 

 

I think CG is probably a good buy here too.  They have some potential margin expansion and multiple expansion for the reasons n.r98 mentions.  However, I also prefer KKR and APO, though I haven't compared particularly at current prices.

 

The alternative asset managers have become more than just PE shops and I think management and longer term planning is pretty critical for the best outcomes.  As these companies grow, they need to find new large areas to expand into in the next 5 year, 10 years and beyond.  I believe that Bruce Flatt mentioned that the next 2-3 years of 15%+ growth are locked in and they are starting to work on the years after that.  I think BAM and others are looking significantly farther after that.

 

Marc Rowan at APO has a strategy.  Many may think it is insurance, and it is, but it is also credit origination.  Plus, he's chosen Australia, Japan and Europe geographically.  Bruce Flatt (Brookfield) has a strategy and that is pushing hard into infrastructure, energy transition and, I believe, Asia.  BX has gone hard into real estate and retail distribution.  KKR is always talking about their proliferation of strategies.

 

As I see it, everyone is trying to position themselves to be able to grow double digits not just for the next few years, but in 5 and 10 years, and hopefully beyond.  I'm not sure who has the best strategy, but I think each company is pursuing a strategy.

 

CG just really hasn't had the leadership stability for me to have as much confidence in the same.  In 2018 they named co-CEOs.  In 2020, Youngkin left and Kew was sole CEO.  In 2022, Kew left and they have been without a CEO for a number of months. 

 

From my vantage point, I thought Kew was very effective.  I thought it was a big mistake not to run with Kew and am concerned it was a personalities clash and not performance.  That's just speculation of course.  I mean, I listened to at least most available interviews and I'm not sure Kew and I would be best friends (that's not a knock on Mr. Lee - his public persona seemed perfectly fine), but I think he was doing the job and had the company headed in the right direction.

 

I got off on a bit of a tangent there, but the point is that leadership is critical and CG hasn't had enough stability in the recent past.  Here's hoping the new CEO gets them onto the right track.

[tnathan]

Put on a pair trade  - short arkk (via SARK) and then bought DIA...Unless we really have a crazy run here I think this works out well. Does anyone disagree? Open to feedback!

[Red Lion]

1 hour ago, StevieV said:

 

I think CG is probably a good buy here too.  They have some potential margin expansion and multiple expansion for the reasons n.r98 mentions.  However, I also prefer KKR and APO, though I haven't compared particularly at current prices.

 

The alternative asset managers have become more than just PE shops and I think management and longer term planning is pretty critical for the best outcomes.  As these companies grow, they need to find new large areas to expand into in the next 5 year, 10 years and beyond.  I believe that Bruce Flatt mentioned that the next 2-3 years of 15%+ growth are locked in and they are starting to work on the years after that.  I think BAM and others are looking significantly farther after that.

 

Marc Rowan at APO has a strategy.  Many may think it is insurance, and it is, but it is also credit origination.  Plus, he's chosen Australia, Japan and Europe geographically.  Bruce Flatt (Brookfield) has a strategy and that is pushing hard into infrastructure, energy transition and, I believe, Asia.  BX has gone hard into real estate and retail distribution.  KKR is always talking about their proliferation of strategies.

 

As I see it, everyone is trying to position themselves to be able to grow double digits not just for the next few years, but in 5 and 10 years, and hopefully beyond.  I'm not sure who has the best strategy, but I think each company is pursuing a strategy.

 

CG just really hasn't had the leadership stability for me to have as much confidence in the same.  In 2018 they named co-CEOs.  In 2020, Youngkin left and Kew was sole CEO.  In 2022, Kew left and they have been without a CEO for a number of months. 

 

From my vantage point, I thought Kew was very effective.  I thought it was a big mistake not to run with Kew and am concerned it was a personalities clash and not performance.  That's just speculation of course.  I mean, I listened to at least most available interviews and I'm not sure Kew and I would be best friends (that's not a knock on Mr. Lee - his public persona seemed perfectly fine), but I think he was doing the job and had the company headed in the right direction.

 

I got off on a bit of a tangent there, but the point is that leadership is critical and CG hasn't had enough stability in the recent past.  Here's hoping the new CEO gets them onto the right track.

Imagine Brookfield acquiring CG and then allocating the balance sheet to BN and the asset manager to BAM. If they used a combination of shares at let’s say a 50% premium it would still be accretive, and presumably this could help achieve scale and aum growth for BN to rival BX. Probably would never happen, but I think it would create value for shareholders of both companies. 
 

This discussion makes me want to add at least a starter position to CG. I have a starter position in ARES I picked up around $62 at recent lows, and will hold and add if the valuation becomes more reasonable.
 

Picked up a LOT of BX in October through December bringing my cost basis from the $30s up to about $80 (and now my largest position). Added to APO in the mid $50s which is almost equal weight with BX and BN.

 

KKR is my best performer (initiated in 2020 Covid crash) but the one that got away since it’s only about 2/3 of a full position just missed my buy orders in the low $40s. 

Edited February 8, 2023 by RedLion

[Dave86ch]

Added to Bitcoin

[n.r98]

6 hours ago, RedLion said:

Imagine Brookfield acquiring CG and then allocating the balance sheet to BN and the asset manager to BAM. If they used a combination of shares at let’s say a 50% premium it would still be accretive, and presumably this could help achieve scale and aum growth for BN to rival BX. Probably would never happen, but I think it would create value for shareholders of both companies. 
 

This discussion makes me want to add at least a starter position to CG. I have a starter position in ARES I picked up around $62 at recent lows, and will hold and add if the valuation becomes more reasonable.
 

Picked up a LOT of BX in October through December bringing my cost basis from the $30s up to about $80 (and now my largest position). Added to APO in the mid $50s which is almost equal weight with BX and BN.

 

KKR is my best performer (initiated in 2020 Covid crash) but the one that got away since it’s only about 2/3 of a full position just missed my buy orders in the low $40s. 

 

Don't have much knowledge in this space but what are the probabilities that CG tries to sell itself to a bigger player like Brooksfield for e.g.? Why can't that happen? Brooksfield did acquire Oaktree Cap Mgmt a couple years back after all.

 

Some other catalysts not oft mentioned re this space is S&P inclusion - the firms have slimmed their share structures etc. 

 

Also @StevieV, think Kew left because he wasn't granted the pay package he demanded 
https://www.ft.com/content/0d0187d3-e0fb-4e87-bbfb-2e63f467f9f4
 

Edited February 8, 2023 by n.r98

[Gregmal]

On 8/2/2022 at 12:19 PM, Gregmal said:

For those that were interested in UBER a few weeks ago todays release somewhat validates the thesis. I added a smidge more at the open. 

More thesis validation today. 

[StevieV]

2 hours ago, n.r98 said:

Also @StevieV, think Kew left because he wasn't granted the pay package he demanded 
https://www.ft.com/content/0d0187d3-e0fb-4e87-bbfb-2e63f467f9f4

 

I have apparently run out of FT free articles.  If I recall correctly, most of the reporting was that Kew left when the board wouldn't discuss his $300 million pay package proposal.  $300 million is obviously a huge number, but probably not out of line for this type of position.  The new CG CEO has a $180 million incentive program, so the board isn't opposed to a large incentive pay package.

 

I think there was other reporting about him being pushed out as well.  I'm out of Bloomberg articles as well apparently, but the part of the below article that I can see says Kew was abruptly pushed out.

 

I don't know how accurate the reporting is and only the parties closer to this know for sure, but I don't think it is plausible that it was only a pay dispute.  If the board wanted to keep Kew, I think they would have negotiated a deal.  The targets are a huge factor in these incentive deals along with the headline numbers.  The new CEO isn't getting $180 automatically; it requires 110% stock appreciation in 5-years.  If Kew wanted a higher headline number, the board could have put a higher target - 150%, 180% in 5-years.

 

In any event, neither here nor there at this point.

 

https://www.bloomberg.com/news/articles/2022-08-17/carlyle-ceo-drama-exposes-fault-lines-between-old-guard-and-new?leadSource=uverify wall

[Cod Liver Oil]

More Nintendo since there seems to be no obvious catalyst.

Edited February 8, 2023 by Cod Liver Oil

[fareastwarriors]

3 hours ago, StevieV said:

 

I have apparently run out of FT free articles.  If I recall correctly, most of the reporting was that Kew left when the board wouldn't discuss his $300 million pay package proposal.  $300 million is obviously a huge number, but probably not out of line for this type of position.  The new CG CEO has a $180 million incentive program, so the board isn't opposed to a large incentive pay package.

 

I think there was other reporting about him being pushed out as well.  I'm out of Bloomberg articles as well apparently, but the part of the below article that I can see says Kew was abruptly pushed out.

 

I don't know how accurate the reporting is and only the parties closer to this know for sure, but I don't think it is plausible that it was only a pay dispute.  If the board wanted to keep Kew, I think they would have negotiated a deal.  The targets are a huge factor in these incentive deals along with the headline numbers.  The new CEO isn't getting $180 automatically; it requires 110% stock appreciation in 5-years.  If Kew wanted a higher headline number, the board could have put a higher target - 150%, 180% in 5-years.

 

In any event, neither here nor there at this point.

 

https://www.bloomberg.com/news/articles/2022-08-17/carlyle-ceo-drama-exposes-fault-lines-between-old-guard-and-new?leadSource=uverify wall

 
here you go

 

https://archive.is/q3XOU

[Paarslaars]

2 hours ago, Cod Liver Oil said:

More Nintendo since there seems to be no obvious catalyst.

Same

[JAK]

5 hours ago, fareastwarriors said:

 
here you go

 

https://archive.is/q3XOU

Nice, this might have solved a problem for me actually. Needed a copy of something from a site that’s down for work, and Google cache doesn’t store images.

 

On the FT issue.. a way around lots of paywall sites is to Google the title of the article in Cognito mode. No cookies and the native search hit is accessible…

 

Sometimes you might need to delete cookies on Chrome anyway, but I’d say 90% of the time, you don’t.

 

Doesn’t work on all paywalls, but it works on enough!

[aws]

This site helps with lots of paywalls: https://12ft.io/

[Paarslaars]

Alphabet

[Red Lion]

Added APO with cash in 401k. 

[StevieV]

Well, now I know what you thought of the earnings report without asking.

[Castanza]

GOOGL

 

In case non of you are aware. Alphabet is going out of business, everyone will download Edge as their mobile browser and Bing with ChatGPT integration will be the new king and everyone will forego the rest of the Chrome suite.

 

 

 

Edited February 9, 2023 by Castanza