For the past few weeks, I’ve noted that stocks might be entering an “irrational exuberance” type of market. As I noted recently, this latest modest pullback hasn’t broken my faith in that theme, but rather reinforced it.
In other words, I view it as a buying opportunity.
Sentiment is still restrained, and the tone of news coverage has become cautious. This is the pattern seen during pullbacks rather than at the beginning of a bear market.
Technically, the broad market remains bullish. The S&P 500 is approaching its 50-day moving average (MA). This MA has limited pullbacks since the beginning of the year.
A Broad-Exposure Bull Market Beneficiary
With the pullback likely near an end, it’s time to remember the potential of the bull market. A company that can benefit from this trend is Blackstone Inc. (NYSE: BX).
Blackstone is a global investment business investing capital that caters to pension funds and large institutions. It does have some products targeted to individuals, but its focus is on large clients looking for exposure to alternative asset classes like private equity, real estate, credit markets, and hedge funds.
Drilling down to sectors, the company has expertise in infrastructure, life sciences, insurance, and growth equity — sectors attractive to institutions. With that focus, it’s easy to see how the company says its “efforts and capital grow hundreds of companies and support local economies.”
It reminds me of the time Goldman’s CEO noted, “We help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. It’s a virtuous cycle.”
In other words, he is “doing God’s work.”
I’m not sure why investment banks think of themselves in those terms, but they are certainly profitable endeavors. Blackstone manages more than $680 billion and generates significant fee income using that capital to help companies and communities.
The infrastructure bill and the renewed focus on healthcare that Covid created could benefit the company as it places new investments in those sectors.
Private equity will be an important part of growth in life sciences as well. Experienced investment analysts will be needed to determine which companies have the most potential. Infrastructure will also need private equity, since it often takes significant investments to work on projects before payments are made.
In addition to managing assets for investors, Blackstone also manages internal investments. At the end of last quarter, the company reported these assets totaled $169.5 billion. These are assets that boost earnings in a bull market.
Another potential earnings-boosting factor hidden in the company’s financial statements is the fact that BX has $129.9 billion in dry powder. That is the term the company uses for cash that can be used to complete deals. With leverage, Blackstone is able to complete hundreds of billions in deals and that would create additional long-term value for shareholders.
An example of how the company uses dry powder can be seen in the real estate sector. Some real estate investors panicked in the pandemic. That created investment opportunities.
Blackstone’s assets in this sector increased 24% in the past year as investors added $33.3 billion in real estate to their portfolios. BX was an aggressive player in the market. In the most recent quarter, the company privatized Extended Stay America, the largest owner of economy extended stay hotels in the United States. Blackstone also committed an additional $11.0 billion in the quarter, including the acquisition of one of the largest private owners of single-family rental homes and a U.S. data center REIT.
How I’m Trading BX…
Blackstone has a track record of consistently finding opportunities in panics and creating value in bull and bear markets. That makes it a good candidate for long-term investors. But in the short-term, traders can also benefit from opportunities in the long-term trend.
The chart of BX is trending bullishly higher, and the stock recently triggered an Income Trader Volatility (ITV) “buy” signal.
Most investors who are aware of the broad-case I just laid out for BX would simply buy the stock. But over at Income Trader, we can use a simple strategy to generate immediate income from BX without exposing ourselves to the stock for the long-term. That way, if my bullish thesis on the market doesn’t pan out, we won’t get caught holding the stock.
If everything goes according to plan, we’ll be in this trade for less than 31 days, pocket our income, and move on. We also have the ability to make another trade like it if we want to generate additional income.
I like to think of this strategy like having your own “P.I.N.” or personal income number, if you will.
At this stage of the bull market, I think it makes sense to stick with proven strategies like this. That’s because my proven system tells me exactly when share prices are going up or down. Unlike many traders who stab in the dark for price swings, my system leads to thousands of dollars in reliable income every month. In fact, over 90% of the trades I recommend to readers are successful.
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