Blackstone Seeks To Capitalize On Market Downturn

Warren Buffett is among the many market players who see opportunity amidst the recent chaos, and with estimated cash reserves of US$21-billion, The Blackstone Group (BX) is likely considering the same. “Management has a track-record of being opportunistic during times of distress...” said Citigroup analyst Prashant Bhatia, adding that the firm could raise as much as US$20-billion more in the next 18 months.

Capitalizing on any further market turmoil is surely front and center for companies like Blackstone, given that the current financing backlog may take a while to clear, Mr. Bhatia said in a research note.

He expects Blackstone to use part of its reserves to buy leveraged buyout debt, ideally for less than the fundamentals imply. “Blackstone is likely very familiar with the fundamentals associated with this debt since they evaluated most of the deals from a private equity investment perspective already,” he noted.

Meanwhile, Blackstone appears to be immune to the meltdown some hedge funds have seen. In fact, its hedge funds are up so far this year and have performed well during the market’s recent weakness.

As a result, Mr. Bhatia continues to rate Blackstone a “buy” with a US$36 price target, which represents upside of more than 50%.

Comments

[aerius:]

Nice one. BX buys when the market goes up, and then buys when the market goes down. They buy when credit markets are good, and will buy when credit markets are bad. Can’t go wrong with that argument.

Sort of sounds like global warming. If it’s too hot it’s global warming, if it’s too cold it’s global warming. If it’s normal temperature well, it has to be hot or cold somewhere else!

There was a neat article awhile ago on how all the top firms who deal with BX the most all have OP on it. 50% upside, can’t go wrong... right?

2007 Aug 17 12:49 PM