Buy Blackstone Group While It's Still Cheap

Jul.18.07 | About: The Blackstone (BX)

You may have heard of the Blackstone Group's (NYSE:BX) recent IPO. While most analysts caution against getting in on an IPO during the first few months for fear of the ship never getting out of port, in the matter of the Blackstone Group this advice is wholly unnecessary.

The Blackstone Group is a prominent global private equity firm, having plans for a $26B all-cash acquisition of Hilton Hotels Corporation (NYSE:HLT), as well as making numerous deals valued at $370B in 2006 alone. Not only that, but take a look at these fundamentals:

1. Earnings yield of 41.67%, over 8x the 30yr US Treasury yield

2. Price-to-book ratio of 2.45, indicating a clear market undervaluation, as a comparable firm --Fortress Investment Group (NYSE:FIG)-- has a P/B of 53.08, which is in the range of biotechnology research firms and stratospheric compared to the industry average of 4.54--

3. Return on investment is 53.08% --Fortress' ROI was not available for comparison!

4. Operating margin of 94.10%, meaning that Blackstone is INCREDIBLY efficient at it's operations, turning $1.00 of revenue into $0.9410 of profit --Fortress turns $1.00 of revenue into a paltry $0.3416 of profit--

With the current economic expansion, corporations are going to need funding for expansion and growth. With Schwarzman's and Peterson's proven track record, Blackstone is primed for the challenge.

Buy this stock while it's still cheap at 2.4x earnings, or somebody else will!!!

BX 1-mo chart

BX 1-mo chart

Disclosure: none