Discussions about KKR on this site have been numerous over the past few years. KKR has all the attributes that an investor should pursue in a conservative investment:
- Adept management
- Steady history of producing returns
- Aligned with shareholders in seeking appreciation of equity through creative corporate manuevering
- A transformed, long-term shareholder base with their recent conversion from partnership to corporation
Almost exactly one year ago KKR was discussed here in an article titled, KKR Has Long-Term Compounder Written All Over It.
Zenolytics continues to view KKR as a long-term compounder driven by earnings power levered to low interest rates.
The stock has immediate intermediate-term upside to approximately $30 per share for a gain of 20% from current levels.
In the recent earnings calls that took place on April 30th, management painted an appealing picture for investors built on acceleration in assets under management, fees derived from those assets and opportunities available given their sizeable amount of dry powder.
Among the highlights:
- Book value of $16.99 has increased by 17% over the 12 months
- Earnings have increased by 29% over the past 12 months
- Fee paying assets under management has increased by 23% over the past 12 months
Additionally, with the recent steep decline in long-term rates, KKR gains significant advantages in that it allows the company to obtain leverage at more attractive rates AND it further differentiates KKR's overall ability to produce returns, as competitive fixed income yields decline, creating greater demand for enhanced returns.
Overall, given the relative weakness in the financial sector, KKR's ability to outperform should be viewed by investors as a reflection of their earnings power in the face of an otherwise difficult operating environment for financial companies, mid to large sized banks especially.
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