Analysts Initiate Fortress Investment With 'Buy' Rating

After the stock skyrocketed from a starting point of US$18.50 per share on its first day of trading (Feb. 9), Fortress Investment Group LLC (FIG) shares dipped substantially with much of the market in March.

However, the first private equity and hedge fund group to go public in the U.S. saw its shares climb US$1.71 to close at US$28.53 on Wednesday after Banc of America and Goldman Sachs initiated covered on the stock with ‘buy’ ratings.

Tuesday’s announcement from Fortress that it declared a partial first quarter cash dividend of US$0.1225 per Class A share surely helped.

While Banc of America analyst Michael Hecht has a US$35 price target on Fortress shares, Goldman’s Marc Irizarry expects the shares to climb to $32.47.

Mr. Irizarry notes that Fortress offers a unique investment mix that also includes real estate, but thinks investors may be missing a key hidden asset. This is Fortress’s private equity surplus of US$2 per share in latent earnings.

He expects Fortress will raise more than US$6-billion in new capital in 2007, while every additional US$1-billion leads to US7¢ more in distributable earnings.

“Over time, we expect capital raises to positively surprise, driven by new products and significant global growth,” he added in a note to clients.

Meanwhile, another alternative investment firm, Blackstone Group LP, appears to be preparing for an initial public offering.