Have Bain Capital's Woes Spread to Other Private Equity Firms?
Private equity firm Bain Capital, and its actions during its first 15 years, have come under increasing scrutiny as a result of Mitt Romney's 2012 presidential campaign.
Romney was one of the firm's founders, and he has said that he was an executive of Bain Capital until 1999, although SEC filings list him as an executive for three years after that. Controversy regarding the timing of Romney's departure blanketed the news on Thursday and Friday.
In the meanwhile, life goes on at Bain, which announced earlier in the week that it has completed fundraising for its second Asia fund, closing at $2.3 billion. It has also begun raising a $6 billion buyout fund, according to Bloomberg.
Has the scrutiny on Bain spread to other large private equity firms? Investors in Apollo Global Management (NYSE: APO), Blackstone Group (NYSE: BX) and KKR (NYSE: KKR) appear to be nervous. Each of these stocks tumbled in April and May more than the broader markets, and each has begun to recover. But they are still down during the past 90 days, with Blackstone down more than 11 percent and KKR down more than 7 percent. Carlyle Group (NASDAQ: CG) seems to the stand out, as shares are up more than 4 percent since its initial public offering in the beginning of May. But a look at its chart shows that the share price declined following the IPO, along with its competitors, before rising recently.
Apollo Global Management
This stock has been flat during the past month, trading between $12 and $13 a share. Still, shares are more than 4 percent higher than at the beginning of the year. This New York-based investment manager recently announced a change in its CFO position. It has a market capitalization of about $1.6 billion and a dividend yield of more than 2 percent. Its P/E and PEG ratios are less than the industry averages.
The long-term earnings per share (EPS) growth forecast is more than 14 percent and the consensus price target is around 25 percent higher than the current share price, as well as more than 11 percent higher than the 52-week high. The stock has outperformed Blackstone but underperformed the S&P 500 in the past six months.
This New York-based asset management firm announced Friday that it would increase its stake in homebuilder Hovnanian Enterprises (NYSE: HOV), sending Blackstone shares higher on the day and reversing a pullback during the previous week or so. However, the share price is still more than 8 percent lower year to date.
Blackstone's market cap now sits at more than $15 billion and it offers a dividend yield of about 3 percent. The forward earnings multiple is less than the industry average P/E. The long-term EPS growth forecast is more than 14 percent, but note that the return on equity and operating margin are both in negative territory.
Still, analysts seem to think the stock has some room to run, as their consensus price target is about 28 percent higher than the current share price - as well as a bit higher than the 52-week high. In the past six months, the stock has underperformed Apollo Global and KKR.
As mentioned, Carlyle has only been public for about ten weeks. Though the IPO was disappointing, the share price has risen recently - particularly following news that the firm's joint venture with Sunoco (NYSE: SUN) had reached a labor deal that would keep an important oil refinery operating. Washington, D.C.-based Carlyle is an investment firm with a market cap near $998 million.
Carlyle offers no dividend, but its forward earnings multiple is around 10, and its operating margin is greater than the industry average. The consensus price target of analysts is around 10 percent higher than the current share price, and five of 10 analysts who follow the stock recommend buying shares. Since its IPO, the stock has outperformed both KKR and Blackstone.
The share price of KKR has rested just above $13 for the past two weeks, after jumping in June on news that it had raised $4 billion for energy and infrastructure deals. Shares of KKR are more than 2 percent higher year to date.
Headquartered in New York, the $3 billion market cap company has a dividend yield of more than 5 percent. Its long-term EPS growth forecast is a healthy 25 percent, and it has a return on investment of more than 42 percent. The P/E ratio is higher than the industry average, but forecast to fall. Short interest is less than 1 percent of the float. The consensus price target on KKR is more than 22 percent higher than the current share price. In the past six months, the stock has outperformed Blackstone Group. However, it has underperformed the S&P 500 in that time.
While these stocks have not kept up with the broader markets, they do not seem to be in downward spirals either. In fact they may be on the rebound. One thing is for certain, they are not making the headlines in the way Bain Capital has been of late.
Latest Ratings for KKR
|Dec 2014||Morgan Stanley||Initiates Coverage on||Outperform|
|Dec 2014||Barclays||Initiates Coverage on||Overweight|
|Oct 2014||JMP Securities||Maintains||Market Outperform|
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