KKR has been discussed here extensively over the years. In 2018, Zenolytics described KKR as a "long term compounder." Most recently, certain dynamics on both a macro and micro basis forced further discussion of the potential for the investment, as KKR was recommended again for conservative portfolios.
One of the dynamics that will continue to fuel KKR on the upside in the near to intermediate term is that BX (Blackstone) continues to ride a wave of investor driven fury to the upside following news that they are converting from a partnership to a corporate structure. This has numerous advantages for Blackstone, both tax related and otherwise. However, one of the key advantages when it comes to share price is that conversion to a corporate structure allows for all kinds of institutional participation that wouldn't otherwise be possible when being a K-1 totting partnership.
Blackstone has ridden the wave of new investor participation to what is commonly known on Wall Street as a "value unlocking" appreciation in share price. This value unlock in shares of Blackstone, which was terrifically undervalued prior to the conversion, has no end in sight as the piling into private equity leaders who are collecting fees from return hungry investors worldwide is only at mid-stride presently.
To be sure, private equity has a special place in the current economy with low rates, return hungry investors and deals being flipped back and forth in as fluid a manner as anytime over the past decade.
Bringing us to KKR.
The boys over at Kohlberg, Kravis, Roberts & Co. benefit not just from the favorable economic landscape for private equity, but the lustful manner in which investors are chasing its primary rival Blackstone. That lust will naturally spill over to shares of KKR. In fact, they already have, as KKR shares hit a 10 month high yesterday.
Perhaps more importantly, the multiple factors working in favor of private equity here with the added bonus of Blackstone suddenly being a favorite among investors creates a margin of safety in KKR that only further bolsters its positive attributes as an investment in the financial space.
Margin of safety.... Check.
Momentum in the sector.... Check.
Outstanding fundamental backdrop.... Check.
KKR remains a buy with a near-term target of $30.
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