As the father of seven children, I can honestly say I don’t have a favorite. Every one of my kids has their own special place in my heart. I’m equally grateful for each one individually.
But when it comes to my favorite investments, I’m definitely guilty of having a favorite stock. And today, shares of my favorite stock are surging higher after the company reported another strong quarter.
The Blackstone Group (BX) is trading more than 7% higher as I write, thanks to the company’s report of $1.4 billion in profit last quarter.
BX shareholders have endured a steep pullback over the last two months as investors worried about how a higher interest rates and a more challenging market environment could affect earnings.
But this week’s earnings report shows that the private equity company is alive and well and still continuing to generate lucrative profits for clients — and for investors as well.
I love the private equity business because companies like Blackstone can make profits in three unique ways:
- Fees on assets managed for clients.
- Incentive allocations (percentages of client profits).
- And gains on their own investments alongside client funds.
The fee revenue is very reliable and is charged whether Blackstone makes a profit on assets invested or not. This revenue helps keep the lights on and gives BX a lot of stability.
The other two categories are related to the company’s success investing in profitable areas. So as BX does well for its clients, the company also benefits alongside. And if you invest in shares of BX, you get the benefit from these smart investments as well!
In the year ahead BX expects to raise approximately $150 billion which can then be put to work in new investments. The company also has $135.8 billion in “dry powder” which can be invested in more attractive opportunities now that the market has pulled back.
Add it all up and my favorite stock is primed for success in 2022!
Now, let’s switch gears and take a look at some of the important reads crossing my desk today:
Get Ready for a Fed Rate Hike!
- CNBC: Fed points to interest rate hike coming in March.
- With inflation well above 2%, it will soon be appropriate to hike rates.
- Asset purchases are also likely to halt in March.
- The Fed released a paper outlining thoughts on reducing balance sheet.
- Bloomberg: Powell backs March Liftoff, won’t rule out hike every meeting.
- Committee to hike Fed funds rate in March if conditions warrant.
- Expects to reduce balance sheet after it has begun raising rates.
- Yields rose, stocks fell and the U.S. dollar pushed higher.
- MW: Bridgewater co-CIO: S&P needs to drop another 20% to get Fed’s attention.
- Investors should count on choppy markets for the foreseeable future.
- Analysts have written off a “Fed put”, don’t believe Powell will support market.
- Bridgewater’s Jensen sees 10-year yield hitting 3.5% or 4%.
My Favorite Stock (and Others)
- Barron’s: Blackstone rises as profits nearly double.
- Q4 net income was $1.93 per share compared to $1.07 last year.
- Total assets under management grew by 42% to $880.9 billion.
- The company has capital to put to work now that markets have pulled back.
- CNBC: Tesla will not introduce Cybertruck this year.
- Chip constraints keeping Tesla from introducing new models this year.
- “We’re not currently working on the $25,000 car”
- Tesla risks losing ground to Ford which will deliver electric F-150 this year.
Individuals are Borrowing and Trading
- WSJ: Banks are making it easier to get credit cards.
- 29.2 mil credit cards issued to people with credit scores < 660 last year.
- 33% of banks reported easing credit standards for card approvals.
- The average APR on credit cards climbed to near record of 17.13% in Q3.
- WSJ: Reddit’s WallStreetBets users say the thrill is gone.
- Constructive feedback on trades has largely been replaced by cheerleading.
- The VanEck Social Sentiment ETF (BUZZ) is down roughly 18%.
- The average number of daily comments on Reddit’s channel is down 50%.
- WSJ: Fidelity bets on the Reddit crowd.
- Fidelity is placing big bets on future of cryptocurrencies & individual investors.
- The firm has more than 70 million accounts and manages $11 trillion in assets.
Tracking Inflation and the Economy
- Bloomberg: Inflation measure about to register more heat.
- The employment cost index is expected to register a near-record increase.
- This inflation measure could bolster Fed’s resolve to aggressively tighten.
- More than half of surveyed businesses said their companies boosted prices.
- Bloomberg: U.S. economic growth quickened last quarter.
- Q4 GDP rose by 6.9% annualized after a 2.3% pace in Q3.
- The core personal consumption price index rose by 4.9% annualized.
- An increase in inventories added 4.9 percentage points to GDP.
- WSJ: Job market appears healthy despite omicron headwinds.
- Initial jobless claims fell to 260,000 for last week (down 30k).
- Recently, claims have moved higher as omicron spread.
- Job openings, quits and hires were at or near record highs in November.
- MW: U.S. durables-goods orders drop sharply in December.
- Orders for durable goods fell 0.9% in December.
- Transportation equipment drove the decline.
- Orders for cars & planes down 3.9%, but ex-transports, orders rose 0.4%.
- MW: Trade deficit in goods tops $1Trillion for first time.
- Americans are buying a record amount of imports.
- Strong demand for retail goods has been a big part of supply chain bottlenecks.
- Demand for U.S. exports has been slow to bounce back.