A piece in this week's issue of Barron's look at (subscription required) The Blackstone Group (NYSE: BX), wondering whether the stock that has performed brutally since its IPO might at last be worth a look.
The company is trading under $18.50, down from a post-IPO high of $38 reached in June, and sports a dividend yield of around 6.5%.
But Barron's warns investors that they could be in for a surprise: "Few shareholders are aware of Blackstone funds' "claw back" feature, requiring the company to refund to investors already-booked incentive fees if subsequent investments suffer. Claw backs are common in private equity, but rare among traditional asset managers and hedge funds. They protect investors from paying big fees and then getting disappointing returns."
Problems in the credit markets and a lackluster economic outlook could trigger clawbacks, and some of Blackstone's past earnings could evaporate in a wave of charges. That would definitely be bad news for anyone buying the stock at its current levels.
I'll be staying away from Blackstone for a different reason entirely: at the time of the IPO, I thought that it was a cynical effort by chairman and CEO Stephen Schwarzman to cash in some of his chips at the top of what he saw was a bubble. Add in concerns about the company's accounting, and this is just not a company that I find myself completely trusting.
And if I can't trust the management, I'm not going to touch the stock.
Is Blackstone Group finally a buy?
BloggingBuyouts is provided for informational purposes only. Nothing on the service is intended to provide personally tailored advice concerning the nature, potential, value or suitability of any particular security, portfolio or securities, transaction, investment strategy or other matter. You are solely responsible for any investment decisions that you make. The contributors who provide the content of BloggingBuyouts may, from time to time, hold positions in the securities discussed at the time of writing and they may trade for their own accounts. Such holdings will be disclosed at the time of writing. By using the site, you agree to abide to BloggingBuyouts' Terms of Use.
