Most analysts are predicting a tough market ahead for
2023.
I won’t argue. But even in a bad market, there are
usually some stocks that go up anyhow.
So, today, and in my next column, I’m going to
describe two stocks that I expect to at least beat the market next
year, and hopefully, even in a down market, produce positive
returns.
Today, I’ll start with Blue Owl Capital (OWL).
Alternative Assets
The term “alternative assets” applies to non-publicly
traded assets such as privately-held companies, venture capital,
real estate and commodities. Blackstone (BX) is the largest
publically traded alternative asset investor.
Blue Owl Capital is probably the
smallest. It was formed via a December 2020 merger of two
alternative asset investors, Owl Rock Capital Group and Dyal Capital
Partners.
After its May 2021 IPO, Blue Owl then acquired two
more alternative asset managers, Oak Street Capital in October 2021
and Ascentium Group in December 2021. Although a combined
corporation, the original four companies still operate more or less
independently.
Blue Owl:
All About
Growth
Blue Owl is in fast growth mode. September
quarter Assets Under Management which totaled $132 billion, were up
87% vs. year-ago. Revenues soared 107% to $371 million.
As I’ve mentioned in previous
articles, share prices track annual earnings per share (EPS)
closer than any other single factor. For next year, analysts are
forecasting 30% EPS growth, powered by a 34% jump in revenues. Why
such spectacular growth?
Permanent Capital: The Best Kind
According
to a recent analyst report, over 80% of Blue Owl’s assets under
management can be classified as “permanent capital.” What’s that?
Permanent capital does
not have to be paid back at any predetermined date, if at all.
Shareholders can only withdraw their investment by selling their
shares to someone else. That’s the best kind of cash to have. Why?
Blue Owl doesn’t have
to be continuously procuring new cash to replace cash coming due to
be repaid. For comparison, only about 20% of Blackstone’s net asset
value qualifies as permanent.
Dividends: 20% - 25%+ Annual
Growth
Blue Owl paid its first quarterly dividend, $0.04 per
share, in August 2021. Since then, it has raised its quarterly
payout by $0.01/per share in most quarters. Its most recent payout,
$0.12 per share in November, was 33% above year-ago.
According to analysts, that trend will continue.
They’re expecting quarterly dividends to average $0.15 per share
next year and $0.18 in 2024. To put those numbers in perspective,
that’s around 25% dividend growth next year and 20% dividend growth
in 2024.
These are my ideas, but do your own due diligence.
The more you know about your stocks, the better your results.
published 12/21/22
