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The Blackstone Group L.P. Message Board

holding38 4 posts  |  Last Activity: Aug 10, 2014 6:17 PM Member since: Jun 22, 2009
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  • Reply to

    Back of envelope NOI projection for ACAS

    by donedealer Aug 9, 2014 9:10 PM
    holding38 holding38 Aug 10, 2014 6:17 PM Flag

    Done,

    You may be right--but then again you may not be. the problem with your calculation is that you are projecting into the future a capital structure and set of activities that are unlikely to be continued in their present form. The investment in floating rate debt, for example, is a temporary expedient to generate income flow from what otherwise would be cash held to facilitate the restructuring.

    In the future, I would expect ACAM to be a fairly high growth asset manager and to be valued as such. This will happen as new funds are added and existing ones expand in size. Take MTGE, for example, which I began investing into a little over a year ago and have continued to add to. The fears of sharply rising interest rates hit the company sharply and it was forced to restructure its holdings and increase its hedges to protect NAV; this is costly and reduced earnings, forcing cuts in dividends. The strategy has proven quite successful and dividends have leveled off; I believe that within about 6 months they will start increasing again (not bad for a stock yielding close to 13%). MTGE is still selling well below NAV, so additional stock cannot be sold to increase ACAM/ACAS earning assets. In the future, however, the stock is quite likely to sell above NAV and open the door to the sale of additional equity on a significant scale. The opportunity here can be seen by comparing the market cap of MTGE to that of AGNC. I also expect substantial expansion of the energy & infrastructure fund and the new funds now being rolled out.

    I expect the income-oriented business development company fund to focus on high-yield loans rather than equity or floating rate loans, thus increasing the potential for rising dividends. For these reasons, I don't think it is appropriate to project into the future a valuation based on the activities of the recent past.

    Sentiment: Buy

  • Reply to

    Since announcement of two weeks ago...

    by simple_mind99 Apr 14, 2014 1:08 PM
    holding38 holding38 Apr 15, 2014 1:53 PM Flag

    Done,

    According to Yahoo Finance, at year-end 2013 (most recent figures), 303 institutional and mutual fund holders held 62% of outstanding ACAS shares. To my mind, the poor price action of ACAS stock is not due to unsophisticated shareholders, but to management's failure to follow thorough on its good news announcement by making its plans at least somewhat more specific.

    Sentiment: Buy

  • Reply to

    Question for NMB

    by foxhsmart Mar 25, 2014 1:23 PM
    holding38 holding38 Mar 31, 2014 3:06 PM Flag

    Fox,

    I can't pretend to reply with the acumen of NMB and will be awaiting his response as eagerly as you are. I am holding some of the the Jan. 15 calls and wish I could have purchased more on Friday (I did think about it) but unfortunately one needs cash to be able to buy those things. But I did want to comment on your recession frequency reference ("every 4-5 years historically").

    Historically, most recessions follow a pattern. After a few years of expansion, wage and price pressures reinforce one another and make the Fed raise interest rates. A few rate increases bring the market expansion to a close and prices turn down, anticipating the coming recession. Expansions don't die of old age, they die of rising interest rates. Precisely because this expansion has been so weak, such inflationary forces are unlikely to be present for a few more years at least. As for the likelihood of an unpredictable shock--well, that can't be predicted.

  • holding38 holding38 Mar 13, 2014 6:38 PM Flag

    Thank you NMB, for both your analysis and information, which have been a great help to all the long-time readers of this message board. I have been holding 200 ACAS Jan'15 calls since last June at @1.22, but must confess to frequent moments of doubt. I think it is clear in which direction ACAS is going--thanks in large part to your analyses and information--but the process seems to be unnecessarily dragged out; hence the moments of doubt.

    I should also thank you for your early comments on MTGE. I didn't buy early myself, but when the price came down I began accumulating at an average price of 19.26.

    Best of luck to you and to all longs.

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