Bet on Asset Managers to Win as the Economy Grows Over Time

The financial sector is dominated largely by banks, but there are other niches in the space that can be a better place for investors. That’s because bank stocks can see massive declines during credit events. Or if a bank goes under, the stock can become worthless.

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  • That’s why other parts of the financial sector look reasonable. Many tout the insurance space. But asset managers are often an overlooked play.

    Asset manager Blackstone (BX) is one such player, although it may be better known now that it’s being added to the S&P 500.

    Asset management companies tend to grow massively during economic booms, but tend to pull back as assets are valued lower during a poorly-performing economy.

    At present, Blackstone is valued at 17 times earnings, a slight discount to the overall market. But revenues are soaring with the market rally this year, up 578 percent.

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  • Action to take: Investors may like shares here or on any market drop lower. Asset managers tend to outperform the market over time with less risk than a bank stock. Plus, Blackstone yields about 3.3 percent at current prices, a better payout than many banks.

    For traders, the January 2024 $125 calls, last going for about $2.50, could see mid-to-high double-digit gains from here. That will still leave shares well under their late-2021 all-time peak of about $140 per share.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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