I have always been intrigued by hedge funds. Admittedly, they have received tons of publicity - both good and bad. Likewise, their performance has also been both good and bad.
Over the weekend, I spent some time looking into four of the more popular "Private Equity" vehicles. I guess the term "hedge fund" has outlived its usefulness.
The following is a summary of some of the more pertinent data for each of these vehicles. In no way does this information constitute a recommendation on my part to buy any, or all of them. My intention is to identify if any of these private equity funds would, at some point be attractive for inclusion in the Protected Principal Retirement Strategy portfolio. After a brief discussion of each, I will present a tabular summary of detailed metrics to facilitate further analysis.
Apollo Global Management LLC (APO)
A diversified investment vehicle, APO invests in a wide range of companies throughout North America and Europe, with emphasis on the United States. For a further description of their investment approach see the link (here). On their website, APO describes itself as "contrarian value-oriented investors".
APO will release its report for the quarter ending March 2013 on May 6th.
Earnings estimates for the full year 2013 are $3.32, and are forecast to slightly decline in 2014 to $3.10 (from Yahoo Finance). APO has exceeded analyst estimates for each of the past four quarters. Its five-year forward compound annual growth rate [CAGR] is 17 percent.
Over the past four quarters, APO has paid a total of $1.94 in dividends for a yield of 7.5 percent based upon last Friday's closing price of $25.87.
The Blackstone Group (BX)
BX is an alternative asset management group, providing financial advisory services worldwide. A more detailed description of its business is provided (here).
BX has already released its first quarter 2013 earnings report and beat analyst estimates for $.54 by a penny. It too has beaten estimates each of the past four quarters.
Earnings estimates for the full year 2013 are for $2.25, and for 2014 the estimate is for $2.71. The five-year CAGR is 15.9 percent.
BX has paid a total of $.92 in dividends over the past four quarters for a current yield of 4.5 percent based upon last Friday's closing price of $20.26.
The Carlyle Group LP (CG)
The Carlyle Group is an investment firm specializing in direct, and fund of fund investments. It invests in the United States, Africa, Asia, Europe, the Middle East and South America - truly global in its focus. (Here) is the link to a more detailed description of its endeavors.
CG will release its first quarter 2013 earnings on May 8.
Earnings estimates for the year 2013 are $3.12, and for 2014 are $3.40. The five-year forward CAGR is 28.7 percent. CG has been publicly traded for three quarters and has beaten analyst's estimates only once, missing badly the other two quarters.
Over the three quarters of public trading, CG has paid out a total of $1.12 in dividends, and since dividends vary no estimate of annual yield is given.
Kohlberg Kravis Roberts & Co. (KKR)
A private equity investment firm, KKR specializes in special situations, acquisitions, leveraged buyouts in a wide range of industries. In addition to investing in companies in the U.S. and Europe, it also seeks to invest in a large number of emerging market countries. A more complete description is provided (here).
KKR has already released its first quarter 2013 earnings and beat estimates by $.06 with earnings of $.88.
For the full year 2013 estimates call for earnings of $2.49, and for 2014 they are $2.37. The forward CAGR is -8.1 percent. KKR has beaten analyst's earnings estimates each of the last four quarters.
Over the past four quarters, KKR has paid a total of $1.22 in dividends for an annual yield of 5.8 percent based upon last Friday's closing price of $21.05.
Other Private Equity Firms
There are other private equity firms that could have been included such as Oaktree Capital Group (OAK); however, I chose to only include four of the most popular (in my opinion) of the group.
The table that follows provides a comparison of key financial metrics for each of the four private equity firms I discuss above.
|Return On Equity||73%||N/A||19%||N/A|
|Quarterly Revenue Growth||81%||30%||-9%||-27%|
|Quarterly Earnings Growth||1469%||187%||-97%||1.6%|
In evaluating this type of investment vehicle I look for the following where possible:
- A forward P/E lower than the trailing P/E
- A PEG ratio of 1.0 or less
- A Price/Book ratio of less than 2.0
- A Price/Sales ratio of less than 2.0
- Positive revenue and earnings growth
Of the four private equity firms covered in this article, if I were buying one (and I am not at this time) I would probably give strongest consideration to Apollo, pending results to be released on May 6.
Additional disclosure: This article does not constitute either a buy or sell recommendation for any of the stocks mentioned.