I kind of suspected yesterday's rally would have a hard time gaining traction. Many of the headlines surrounding the coronavirus look good, and we are edging closer to election day, which I think has the potential to go horribly wrong. It does not help that the big tech companies did not provide the type of earnings report perfection needed to justify their valuation, so we see weakness there as well.
As I look at the flood of earnings reports coming in, one group of companies is blowing the doors off everyone else. The tumultuous markets and low-interest rates have provided a perfect storm of opportunities for private equity companies. So far, they have taken advantage of all the weirdness 2020 has to offer.
Anyone who has been around me for any length of time knows I love the private equity business. I wish that I had been smart enough to go into the PE business back in the 1980s, but at least I can own the big PE firms today and benefit from their growth.
December 2016 was the first time I suggested buying the big three PE firms and just never selling.
It has worked on pretty well for those who followed my lead at the time:
Blackstone (BX) 24.78% annualized return
KKR (KKR) 26.81% annualized return
Apollo (APO)25.51% annualized return
If and when we get a test of the March lows, I won’t just be buying community banks. It will be time to add or initiate a position on the big three PE firms as well.
The big private equity firms have made a ton of cash from their private investment in public equity deals (PIPE) back in March and April. They are recapitalizing companies with a good business but maybe had too much debt on the balance ...