KBW Boosts Fortress Investment Group To Outperform, Keeps Oaktree Capital As 'Top Pick'

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In a report published Monday, Keefe, Bruyette & Woods analyst Robert Lee said that the alternative asset managers delivered mixed results in 2Q. Although asset returns were weak, there was “a wide range of returns and realization activity” during the quarter and new capital formation also remained positive.

Analyst Robert Lee upgraded the rating on Fortress Investment Group LLC FIG from Market Perform to Outperform, while reducing the price target from $8.75 to $8.50. Lee maintained an Outperform rating on Oaktree Capital Group LLC OAK, with a price target of $63. The analyst cited Oaktree Capital Group as the top pick in the sector.

In the report Keefe, Bruyette & Woods noted, “Heading into 3Q, some already announced strategic sales provide some momentum, and our forward distribution forecasts tended to change little, but volatile equity markets are likely to weigh on IPO and follow-on offerings, at least for the time being. On the other hand, the capital formation outlook remains positive.”

Lee said that the values “remain attractive,” citing the reasons as:

  1. Distributable earnings and distributions into 2016 “still have the potential to remain at healthy levels,” and at current prices, “forward estimated yields are attractive”
  2. Secular tailwinds driving capital formation remain positive
  3. Non-redeemable assets under management (AUM) and “the potentially substantial long-term performance advantages they bring” continue to be “undervalued by many investors”

Oaktree Capital Group was in “a healthy fund raising cycle on key funds” and distributions were likely to accelerate next year “as more legacy funds move into a cash carry position,” the report added.

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Posted In: Analyst ColorUpgradesPrice TargetAnalyst RatingsKeefe Bruyette & Woods
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