H J Mann

Last year hedge fund giant Blackstone (BX) went public in the low $30s. After a brief run-up to the high $30s, the stock waned into the $20 range. In January, with the stock languishing at around the $20 mark, Blackstone announced a buy back. Since then, the stock has fallen another 20%, and has made a new all-time low multiple times in recent days.

It seems to me that Blackstone has been dragged down in the carnage afflicting financials, and that this is very overdone. The bear case is that financing has dried up and there will be no big deals this year that will help drive Blackstone earnings. I am in the camp that the worst is over, and that the rest the year, particularly the second half, will be very strong for the market in general, for financials in particular, and very specifically for those stocks such as Blackstone that should have never been pounded this much in the first place. In fact, I would go one step further and say that the return of M&A will be one of the major catalysts jumpstarting the market later this year.

Last week, Barron’s magazine penned an article laying out scenarios that if realized they said would drive Blackstone to $15. If you wanted a measure of downside risk, you could use the $15 mark as a floor. This leaves Blackstone with a manageable downside and a whole lot of upside. These are really the smartest guys on Wall Street. Betting with them at these levels is very tempting.

Disclosure: As of publication I have no positions in the stocks mentioned here. I am not a professional, but I am trying this at home. It is highly recommended that you consult a licensed financial advisor or broker before making any and all investment decisions.

Tags: Business And Life //