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Summary

  • The stock felt like it was at a top because it had overbought technicals and the momentum was losing steam.
  • The company plans to rid itself of about 103.5 million shares of Hilton, a company it brought public.
  • The company plans to IPO its single family rental property business, Invitation Homes, in about a year.

The Blackstone Group L.P. (NYSE:BX) is a manager of private capital and provider of financial advisor services. On April 17, 2014, the company reported first-quarter economic net income of $813.9 million which was in line with expectations. During the past year, the company's stock price is up 56.62%, excluding dividends (up 61.38% including dividends), and is beating the S&P 500 (NYSEARCA:SPY), which has gained 18.28% in the same time frame. I recently sold Blackstone out of my growth portfolio because I felt it was time to get out of the stock and put the money towards something else at that time. With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial, and technical basis to see if I should add it back into my portfolio at this time.

Fundamentals

The company currently trades at a trailing 12-month P/E ratio of 15.93, which is fairly priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 9.52 is currently inexpensively priced for the future in terms of the right here, right now. Next year's estimated earnings are $3.56 per share and I'd consider the stock inexpensive until about $53. The 1-year PEG ratio (1.19), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is fairly priced based on a 1-year EPS growth rate of 13.36%. The company has great near-term future earnings growth potential with a projected EPS growth rate of 13.36%. In addition, the company has great long-term future earnings growth potential with a projected EPS growth rate of 22.35%.

Financials

On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 4.12% with a payout ratio of 66% of trailing 12-month earnings while sporting return on assets, equity and investment values of 4.4%, 21.3% and 14.9%, respectively, which are all respectable values. Because I believe the market may get a bit choppy here and would like a safety play, I believe the 4.12% yield of this company is good enough for me to take shelter in for the time being.

Technicals

(click to enlarge)

Looking first at the relative strength index chart [RSI] at the top, I see the stock is in overbought territory with a current value of 73.76. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is above the red line with the divergence bars decreasing in height, indicating the bullish momentum is getting tired. As for the stock price itself ($33.94), I'm looking at $34.21 to act as resistance and $32.65 to act as support for a risk/reward ratio, which plays out to be -3.8% to 0.8%.

Recent News

  1. The company announced that it's looking to rid itself of 103.5 million shares of Hilton (NYSE:HLT). By doing this, the company will reduce its stake in the hotel company to 66% from 76% as the lockup period past a few days after the December 2013 IPO. I recently bought Hilton and it has done well for me thus far so I don't blame Blackstone for taking some profits.
  2. The company plans to IPO Invitation Homes in about a year. Invitation Homes is the company's single family rental unit business whereby Blackstone was to buy up to $150 million worth of homes in a week last year, fixing them up and renting them out.
  3. The company is also bringing Travelport public in the near future. Travelport is a travel booking platform the company bought eight years ago for $4.3 billion. The company may raise about $500 million from the offering to pay off some debt. Travelport has about a 37% stake in Orbitz Worldwide (NYSE:OWW).

Conclusion

I sold Blackstone for a 5.61% gain including reinvested dividends and dollar cost averaging, or 9% on an annualized basis. I just felt it was time to leave Blackstone because the near-term growth expectations have decreased a bit from when I bought it.

Fundamentally, I believe Blackstone to be inexpensively valued based on 2015 earnings, but fairly priced based on future growth potential while sporting great near- and long-term earnings growth potential. Financially, the dividend is excellent and the financial efficiency ratios are pretty good. On a technical basis, the stock is in overbought territory and momentum looks to be losing steam. I will not be putting any capital to work in the name right now but rest assured I'll take a look at it again if I see it pull back.

Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Source: I Sold High-Yielding Blackstone Out Of My Growth Portfolio