Is Blackstone Group A Buy?

With shares of Blackstone Group (NYSE:BX) trading around $22, is BX an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Blackstone Group provides alternative asset management and financial advisory services worldwide. It operates in five segments: Private Equity, Real Estate, Hedge Fund Solutions, Credit Businesses, and Financial Advisory. The company is an independent manager of private capital worldwide with assets under management of $210.2 billion. Its asset management businesses include the management of private equity funds, real estate funds, funds of hedge funds, credit-oriented funds, collateralized loan obligation vehicles and separately managed accounts. It also provides a range of financial advisory services that include: financial advisory, restructuring and reorganization and fund placement services.

Blackstone Group is trying to benefit from the housing and property value resurgence, with plans to sell its expansive La Quinta hotel chain. The company is valuing the hotels at $4.5 billion, and it also plans to sell shares of its Extended Stay America hotel operator, which has an equity value of around $3 to $4 billion.

T = Technicals on the Stock Chart are Strong

Blackstone Group stock has seen a consistent bid higher and has been trying to reach 2007 prices. The stock is now trading slightly below highs for the year. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Blackstone Group is trading above its rising key averages which signal neutral to bullish price action in the near-term.

BX

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Blackstone Group options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Blackstone Group Options

29.54%

23%

22%

What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options

Flat

Average

September Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Blackstone Group’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Blackstone Group look like and more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

226.32%

163.64%

-53.57%

142.86%

Revenue Growth (Y-O-Y)

64.49%

30.88%

32.99%

1085.65%

Earnings Reaction

6.42%

-2.20%

3.24%

4.45%

Blackstone Group has seen improving earnings and rising revenue figures over the last four quarters. From these numbers, the markets have been upbeat about Blackstone Group’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Blackstone Group stock done relative to its peers, KKR & Co. (NYSE:KKR), Carlyle Group (NASDAQ:CG), Invesco (NYSE:IVZ), and sector?

Blackstone Group

KKR & Co.

Carlyle Group

Invesco

Sector

Year-to-Date Return

46.31%

33.62%

6.57%

24.99%

22.91%

Blackstone Group has been a relative performance leader, year-to-date.

Conclusion

Blackstone Group is a asset manager and financial services provider to consumers and companies worldwide. Recent strategic moves with a couple of hotel chains they own may prove worthwhile for the company. The stock has been trending higher in recent years and is now trading slightly below highs for the year. Over the last four quarters, investors in the company have been upbeat as earnings have been improving while revenue figures have been rising. Relative to its peers and sector, Blackstone Group has been a year-to-date performance leader. Look for Blackstone Group to OUTPERFORM.

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