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Blackstone Group (NYSE:BX) is an asset management and financial services provider which has its fingers in private equity and real estate. It has performed fabulously over the last four years.

Since bottoming out at around $5 during the financial crash in 2009, BX's stock price has risen over 450% to its current level at just over $22 a share. This should be considered in the context of the Dow Jones, which has appreciated only 100% (wow that sounds greedy) in the same time horizon. See the chart below.


(Click to enlarge)

Solid Fundamentals

Looking at BX's income statements over the last three years it is clear that BX has turned the corner from the financial crisis and is now rolling on all cylinders. In 2010 BX's net income was negative $370M, in 2011 it was negative$168M, and then in 2012 it was positive $219M. EBIT tells the same story, going from negative $481M, $135M, and then over $1B, in 2010, 2011, and 2012, respectively.

R/E ratios tell essentially the same story. With a current P/E ratio of 37.82 and a forward P/E ratio of 8.27, its current stock price while seemingly sky high does seem to be a fair valuation at a minimum. For context, BX's forward P/E ratio is perfectly in line with KKR's (NYSE:KKR) forward P/E ratio of 8.78.

Executive Pay

While the management team are certainly impressive, perhaps even more impressive is their compensation. The CEO, CFO and vice chairman were paid $8.4M, $7.4M and $7.6M, respectively last year. Moreover, these numbers are a pittance compared to the $33.3M payment to the President and COO Hamilton Evan James. Rewarding management for stellar performance certainly has its place, but at a minimum an investor should be aware of these figures. Although, to be fair, KKR rewards its management just as handsomely if not more so with both co-founders making $35M a piece. So while the pay for management may appear lavish, it is also an industry standard.

Insider Transactions

Since February of this year, there have been 6 reported insider transactions. They were all sales. In sum, the sales represented 4.5M shares, or roughly 15% of ownerships position in the company. See the table below for details.

Date

Insider

Shares

Transaction

Value*

Mar 4, 2013

HILL J TOMILSON

Officer

7,878

Sale at $19.09 per share.

150,391

Mar 4, 2013

HILL J TOMILSON

Officer

542,122

Sale at $19.08 per share.

10,343,687

Feb 21, 2013

HILL J TOMILSON

Officer

450,000

Disposition at $19 per share.

8,550,000

Feb 14, 2013

JAMES HAMILTON EOfficer

400,000

Sale at $19.09 per share.

7,636,000

Feb 13, 2013

JAMES HAMILTON EOfficer

1,349,209

Sale at $18.31 per share.

24,704,016

Feb 12, 2013

JAMES HAMILTON EOfficer

1,750,791

Sale at $18.22 per share.

31,899,412

Furthermore, all the insider sales occurred at prices far below the current stock price. This is not a positive signal for the stock. Although to be sure, this is really just a consequence of the aforementioned continued stock appreciation.

Recommendation

I actually owned BX for a while last year buying it at around 12 in May of 2012. Unfortunately, I sold my position later that year at about a 40% profit in September. Hindsight is 20/20 and looking at things now I would have been happy to have kept my money in BX. Nonetheless, putting aside my seller's remorse, I am hesitant to initiate a large new position at these levels. On other hand, given the strong management, fundamentals, and attractive dividend (5%) I am considering initiating a smaller position, with the option to expand the position on a dip.

Source: Blackstone Group: Up 400% Since 2009, Up 40% YTD, Can Its Amazing Run Continue?