"The entire [private equity] group trades at an enormous discount to the traditional asset managers, says Brandywine analyst Charlie DyReyes, sounding like he listened in on Blackstone's (BX +1%) earnings call late last month. The traditional players are at 15x earnings, while the P-E group - with faster growth potential - trades at 10x.
Blackstone is one of Brandywine's favorite holdings, says DyReyes, and at 15x would be a $45 stock, nearly 50% higher than today's price. Payoff as the firm cashes in on past investments should be one catalyst, and the trend of investors putting more money into alternative asset managers should be another. There's also the payout - if maintained, the stock will yield 7.4% over the coming year.
"I think the Blackstone model is really the model that all of their peers are trying to emulate," says Sandler O'Neill analyst Michael Kim. "With Blackstone you get a yield story, certainly you get a growth story in terms of distributable earnings, and the valuation gap remains. So investors can win any number of ways."