By Michael Arold
Disclosure: Long BX
On Thursday, February 10, I added shares of public-traded private equity firm The Blackstone Group L.P. (BX) to my Covestor model portfolio. The stock was meeting my criteria for a high-probability short-term trading position: BX has been showing superior relative strength against the S&P 500 index since September 2010. Price momentum had accelerated before the company reported earnings on February 3. I didn’t buy on that day, but rather waited for an opportunity to get the stock at a cheaper price. On 2/10, BX pulled back and rebounded from its 20-day moving average – my signal to action in a strong market. Note that I often prefer to wait for a second bounce for the stock to shake out weak hands. However, buying earlier might be rewarded in strong markets like we have these days. (Source: Yahoo Finance)
BX chart from Google Finance
Shorts don’t play a role with this stock: as of January 14, only 1% of float is held short according to Yahoo Finance. Analysts are optimistic, but not overly bullish: 5 out of 9 analysts following the stock maintain a buy rating on BX (according to Yahoo Finance as of 2/11/11). The most prominent one is probably Goldman Sachs, which has the stock on its “Conviction Buy List” with a price target of $20, according to TheStreet.com.
Blackstone is benefiting from an improving IPO market, which helps the company to profitably unload its investments.
