FILE PHOTO: The ticker and trading information for Blackstone Group is displayed at the post where it is traded on the floor of the New York Stock Exchange (NYSE) April 4, 2016. REUTERS/Brendan McDermid

SEOUL (Reuters) - U.S.-based Blackstone Group said on Tuesday it had agreed to acquire South Korean wholesale drug distributor Geo-Young in a deal with the company’s founder.

Blackstone did not disclose the value of its investment, but Maeil Business Newspaper said the private equity fund had agreed to buy a 46 percent stake in Geo-Young for 1.1 trillion won ($945.2 million) from another private equity firm.

Geo-Young founder and Chief Executive Cho Sun-hae would remain as a shareholder and retain her leadership role, Blackstone said in a statement.

The transaction was expected to close in the second quarter of 2019, subject to regulatory approvals, Blackstone added.</s>SEOUL (Reuters) - U.S.-based Blackstone Group said on Tuesday it had agreed to acquire South Korean wholesale drug distributor Geo-Young in a deal with the company’s founder.

Blackstone did not disclose the value of its investment, but Maeil Business Newspaper said the private equity fund had agreed to buy a 46 percent stake in Geo-Young for 1.1 trillion won ($945.2 million) from another private equity firm.

Geo-Young founder and Chief Executive Cho Sun-hae would remain as a shareholder and retain her leadership role, Blackstone said in a statement.

The transaction was expected to close in the second quarter of 2019, subject to regulatory approvals, Blackstone added.</s>In a previous article I outlined the beginning of my new fund focusing on undervalued volatile dividend stocks that have lucrative option premiums, which allows us to collect income while waiting out any short-term headwinds in strong companies. You can find a link to that article here and the first update here.

The Blackstone Group (BX) is trading at $40.19 a share, approaching 2014 highs of around $42 a share. The surge has been driven recently by the announcement that Blackstone will be restructuring from a Limited Partnership to a Corporation.

Despite the recent jump in share price, the stocks remains at fair value, representing an excellent opportunity for long-term investors to reap the rewards from investing in a fast-growing private equity giant with world-class management, a rock solid balance sheet, and a current yield near 6% based on last year's distributions.

The Blackstone Group is a multinational private equity, asset management and financial services firm founded in 1985 by Peter George Peterson and (current CEO) Stephen A. Schwarzman. Blackstone currently manages funds that invest across four primary segments; private equity, real estate, hedge funds, and credit.

When we evaluate any company we do so using three main categories:

The most obvious near-term growth catalyst for Blackstone comes from the recent restructuring announcement mentioned above.

According to Blackstone’s management, this change is expected to take effect July 1st 2019, after which BX will switch from paying a distribution requiring a K-1 form to paying a qualified dividend. After this switch institutional ownership will likely soar from its low current level of 39.79%.

By Blackstone’s estimates, 60% of the U.S. long-only and index fund/ETF market is restricted from owning partnerships. The demand that will be created for BX after the change will be huge, as financial sector ETFs and index funds start buying up the stock. This doesn’t include the increased demand by individual investors driven by the relative simplicity of tax accounting for qualified dividends compared to K-1 distributions.

While the restructuring should provide a strong boost to BX’s share price over both the short and medium-term, Blackstone also has several growth opportunities across its business segments.

Blackstone reported 2019 Q1 earnings April 18th , reporting total revenue growth of around 14.5%, from $1.77 billion in Q1 2018 to $2.02 billion this year. For the 12 months preceding this quarter, Blackstone reported a 1% increase in revenue compared to last year. This is impressive given the market meltdown during the second half of last year that hurt Blackstone’s incentive fee revenue as well as revenue from investments.

Blackstone also experienced a 14% increase in Assets Under Management (AUM) to $511.8 billion, with inflows of $42.9 billion for the quarter and $125.7 billion for the year.

Fee Related Earnings margins have also been steadily climbing from the last two years, with a current margin of 46.1%.

Blackstone currently syndicates and manages funds related to its four investment strategies: real estate, private equity, hedge fund solutions and credit.

Blackstone’s 2019 investment performance was strong, will all segments except hedge fund solutions and distressed credit returning double digits.

The real estate and private equity segments represent the majority of capital inflows, with around $84 billion of the prior 12 month’s $125.7 billion total.

In January, Blackstone announced a new platform for investments in fast-growing, mid-stage companies in the health care and financial services industries. The platform is being led by Jon Korngold, a former General Atlantic executive with almost two decades of experience in growth equity investments primarily in the fin-tech and healthcare sectors.

The idea behind the strategy is to invest in companies that still have plenty of growth potential without the risk typically associated with earlier-stage investments.

In January, Blackstone also announced the initiation of the largest real estate fund ever raised, at $20 billion. Some stated opportunities for this fund have been investments in distribution centers used by online retailers, investments in rental housing or investments in properties within cities populated with younger tech-oriented populations. With typical real estate leverage of 3 to 1, Blackstone will likely control $60 billion worth of buying power in the market.

For an idea of the sheer buying power this represents, consider that the value of all residential housing in Mississippi is estimated at $100 billion.

Blackstone continues to find creative ways to invest across asset classes and sectors, which should continue to fuel capital inflows and revenue growth for the long term.

With a credit rating of A+ and a stable outlook, Blackstone currently has the highest credit rating of any alternative asset management company. Combined with recurring revenue from advisory fees and a diversified portfolio of investments across nearly all asset classes, Blackstone’s balance sheet is rock-solid.

From a valuation perspective, Blackstone is currently trading at around 15.5 times the high estimates for next year’s earnings. An ideal purchase price would be below $35, but it is unlikely that the shares retreat to this level anytime soon given the recent restructuring announcement.

As stated previously, Blackstone’s “dividend” current exists in the form of partnership distributions. These distributions change every quarter and can go up or down depending on the profitability of Blackstone during that time period. For 2018, Blackstone paid out $2.42 for the year, which would equate to a yield of around 6% based on today’s share price. While 2019’s distributions are expected to be down from 2018, over the last 10 years the CAGR has been 17.23%.

With private equity remaining in favor and Blackstone continuing to increase its AUM, the company should have plenty of ability to continue increasing the dividend going forward. Combined with Blackstone's predictable fee-based business model, steadily increasing AUM and A+ credit rating, Blackstone represents a high-yielding "sleep well at night" investment that should be seriously considered by any income investor.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.</s>While the market driven by short-term sentiment influenced by uncertainty regarding the future of the interest rate environment in the US, declining oil prices and the trade war with China, many smart money investors kept their optimism regarding the current bull run in the fourth quarter, while still hedging many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding The Geo Group, Inc. (NYSE:GEO).

Is The Geo Group, Inc. (NYSE:GEO) a buy right now? Investors who are in the know are in a bullish mood. The number of bullish hedge fund bets inched up by 1 lately. Our calculations also showed that GEO isn’t among the 30 most popular stocks among hedge funds. GEO was in 18 hedge funds’ portfolios at the end of December. There were 17 hedge funds in our database with GEO positions at the end of the previous quarter.

According to most investors, hedge funds are assumed to be underperforming, old financial vehicles of the past. While there are over 8000 funds in operation at present, We look at the top tier of this club, around 750 funds. These investment experts watch over the majority of all hedge funds’ total asset base, and by observing their matchless investments, Insider Monkey has discovered many investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outrun the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

Let’s take a look at the recent hedge fund action encompassing The Geo Group, Inc. (NYSE:GEO).

What have hedge funds been doing with The Geo Group, Inc. (NYSE:GEO)?

Heading into the first quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in GEO a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in The Geo Group, Inc. (NYSE:GEO) was held by Capital Growth Management, which reported holding $33.5 million worth of stock at the end of September. It was followed by Winton Capital Management with a $12 million position. Other investors bullish on the company included D E Shaw, Arrowstreet Capital, and Renaissance Technologies.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Weld Capital Management, managed by Minhua Zhang, assembled the biggest position in The Geo Group, Inc. (NYSE:GEO). Weld Capital Management had $1.5 million invested in the company at the end of the quarter. Bruce Kovner’s Caxton Associates LP also initiated a $0.9 million position during the quarter. The other funds with new positions in the stock are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s go over hedge fund activity in other stocks similar to The Geo Group, Inc. (NYSE:GEO). We will take a look at Pampa Energia S.A. (NYSE:PAM), Range Resources Corp. (NYSE:RRC), Premier Inc (NASDAQ:PINC), and South Jersey Industries Inc (NYSE:SJI). This group of stocks’ market valuations match GEO’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $318 million. That figure was $95 million in GEO’s case. Range Resources Corp. (NYSE:RRC) is the most popular stock in this table. On the other hand South Jersey Industries Inc (NYSE:SJI) is the least popular one with only 12 bullish hedge fund positions. The Geo Group, Inc. (NYSE:GEO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately GEO wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); GEO investors were disappointed as the stock returned 0.8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

Disclosure: None. This article was originally published at Insider Monkey.
The Blackstone Group, a multinational private equity and asset management firm, has agreed to buy Geo-Young, a wholesale drug distributor in South Korea, in a deal that will retain Geo-Young's CEO, Cho Sun-hae, in her leadership role.