Carla Pasternak, editor of Street Authority'sInvesting , calls
it "turnaround in U.S. history." And millions of people across the
country are reaping its benefits, increasing theirnet worth , while
reducing the stress point that used to cause many to lose sleep at
I'm talking about the clear recovery taking place in the
residential andcommercial real estate markets.
The latest read on the S&P/Case-Shiller Home PriceIndex , a
leading home-value index that tracks prices in 20 residential
markets, showed that home values rose 4.3% in October 2012 from the
previous year, ahead of estimates looking for 4% growth. That
follows the trend that has been in play for the past 12 months,
with home prices showing steady gains through most of the year.
Not only is the settlement value of $8.5 billion barely a glitch
in theearnings power of these major banks andmortgage companies,
but removing the uncertainty of a lawsuitwill likely provide a
boost of confidence and drive higher lending volumes. Both of these
factors will benefit home prices.
If you're a regular reader of StreetAuthority.com articles, then
you may have seen Nathan Slaughter, editor of
Real Estate ."
But as every homeowner knows all too well, investing in housing
is risky and expensive. Broker transactions can easily hit 5%
of the value of the home, and when it's time to sell, homeowners
are frequently confronted with the reality of anilliquidasset
that's difficult to unload. These two factors weigh very heavily on
the total return of any housinginvestment .
That's why I am such a big fan of private-equity firms when it
comes to investing in the housingmarket . These companies stand to
reap huge gains from rising home values and higher lending volumes,
which will likely decrease delinquency rates and increase the value
of distressed loans andfixed-income assets.
[See also: Landlord in 2013]
And my favorite pick from the group is
. The company is a major player in the private-equity space and the
largest private real-estate owner in the United States. Beyond
residential and commercial real estate, Blackstone also operates in
distressed debt, hedge fund solutions and financial
Thestock has already been rallying on the housing rebound. While
home-owners and the market have been cheering the 4.3% rebound in
home prices in the past year -- certainly great news in its own
right -- Blackstone has been ripping higher, posting a
market-smashing 33% return in the past six months. Take a look at
the big gains below.
But even thoughshares are up sharply, there is still plenty of
room for Blackstone to move higher. In fact, I think this stock can
That's because Blackstone is insanely undervalued.
In just the past 90 days, the full-year 2012 estimate has seen
big upward revisions, jumping 11% to $1.63 a share. The full-year
2013 estimate is even morebullish , with analysts projecting 30%
earnings growth to $2.11 per share. Taking the full-yearearnings
estimate of $2.11 a share for 2013, Blackstone trades at just eight
timesforward earnings , a big discount to its five-year average of
12 times and an even bigger discount to its peer average of 18
times. If Blackstone simply traded with the same valuation as its
peers, then shares could more than double to $38.
But it's not just about valuation. Blackstone is also
razor-focused on cashing in on the rebound in housing to grow
earnings. The company recently accelerated purchases of
single-family homes as prices increased faster than it expected,
deploying $2.5 billion from a $13.3 billionfund raised last year to
invest in 16,000 homes to manage as rentals, according to
Bloomberg. Now that's what Icall an investment in housing.
Sweetening the deal a little more is the stock's solid
2.4%dividend yield , safely ahead of thebenchmark 10-yearTreasury
note 's 1.9% yield and the S&P 500's 2% yield.
Risks to Consider:
The big banks have been conservativelenders in the past four
years. Although this trend is improving and should improve more
due to the recent mortgage settlement, lower lending volumes
would continue to weigh on the housing recovery and Blackstone's
Action to Take -->
Anytime I see two of StreetAuthority's experts make such a bold
statement, especially when it comes to the beleaguered housing
sector, I takenote . And Blackstone is uniquely positioned to
benefit from the growing recovery in housing. The stock has great
earnings, an amazing valuation, and while the yield is perhaps a
little low for Carla to consider for
,it's still solid. If shares simply traded with the same
valuation as its peers, then Blackstone could jump to $38 share,
more than 100% from current levels.
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