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Forget Blackstone, Buy These 3 Investment Managers Instead

Zacks Equity Research

The Blackstone Group L.P. BX has lately been witnessing downward revisions. The Zacks Consensus Estimate for earnings of $2.75 for 2017 declined 1.1% over the last 60 days. For 2018, it moved nearly 1% downward to $3.02 over the same time frame.

The stock carries a Zacks Rank #3 (Hold) with an unimpressive Growth Score of F. Our research shows that stocks with a Growth Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best upside potential. Hence, the stock does not look promising at present.

Further, shares of Blackstone have risen 17.8% so far this year, underperforming the industry’s rally of 27.6%.  

So, what could be behind this lackluster performance?

Persistent rise in operating expenses over the last few quarters seems to be a concern for Blackstone. Costs are expected to increase further owing to the company’s well-performing funds that require additional headcount.

Additionally, Blackstone’s high debt burden remains a headwind. The company has debt-to-equity ratio of 0.95 compared with the industry average of 0.08. The company’s high debt obligation might drag it to a relatively disadvantageous position.

Further, unlike other companies in the space, Blackstone’s quarterly dividend payment is a direct function of the earnings generated. The dividend might not be dependable as its quarterly earnings over the last several quarters reflect volatility. Also, given its high debt level and above-industry dividend payout ratio, chances of Blackstone sustaining its dividend payout are dim. This is disadvantageous for income investors.

Picking Favorable Investment Management Stocks

While Blackstone doesn’t appear to be an attractive pick right now, there are a few other asset managers that have a better Zacks Rank and Growth Score. Also, these companies have bettered the industry’s rally so far this year.

With the help of the Zacks Stock Screener, we have zeroed in on investment management stocks with a Growth Score of A or B and a Zacks Rank #1 or 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Artisan Partners Asset Management Inc. APAM sports a Zacks Rank #1 and has a Growth Score of B. The company’s current-year earnings are expected grow 53.1% year over year. Further, shares of the company have jumped 29.6% year to date.

Hamilton Lane Incorporated HLNE has a Zacks Rank #2 and Growth Score of A. Its earnings for 2017 are expected to increase 25.3% from the year-ago quarter. Also, shares of the company have surged 83.6% so far this year.

SEI Investments Co. SEIC carries a Zacks Rank #2 and has a Growth Score of B. Further, the company’s 2017 earnings are projected to grow at the rate of 16.3% from the prior year. So far this year, the company’s shares have increased 38.9%.

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