Share This Article

Facebook LinkedIn
Twitter Reddit
Print Email
Pinterest Gmail
Yahoo
Money Morning
×
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • Angel Investing
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
  • Retire
    • Income Investing Guide
    • Retirement Articles
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
Login My Member Benefits Archives Research Your Team About Us FAQ
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • Angel Investing
    ×
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
    ×
  • Retire
    • Income Investing Guide
    • Retirement Articles
    ×
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
    ×
  • Subscribe
Enter stock ticker or keyword
×
5 Ways to Beat the Fed (and Crush Inflation)

Email this Article

Send with mail | ahoo instead.
Required Needs to be a valid email
Required Needs to be a valid email
How to Play the Private Equity Game Without a Million Bucks
https://mney.co/2S2RXSn
Required Please enter the correct value.
Twitter
Stocks: APO, BX, CG, KKR

How to Play the Private Equity Game Without a Million Bucks

This expert insight from Tim Melvin originally ran in Max Wealth on November 20, 2018

Start the conversation

Comment on This Story Click here to cancel reply.

Or to contact Money Morning Customer Service, click here.

Your email address will not be published. Required fields are marked *

Some HTML is OK

Last week, we looked at how financial companies are feeling the pain of lower fees.

But I hinted at one group of financial companies that is not feeling the pain.

It's one of my favorite groups to own – so when the market sold off last month and these stocks began falling towards a Cost of WAR of less than 1, I was pretty excited and ready to break open some bubbly.

Unfortunately, the decline halted and stocks have rallied back, so I did not get a new opportunity to buy them. The numbers are getting there, and I hope that before too much longer I can send Heatseekers members the call to arms with buy recommendations on these powerhouse firms.

These financial companies are private equity firms.

It's hard for most of us to invest directly in a private equity fund, since most require you to be an accredited investor and have minimum investment levels of millions of dollars. However, we can buy shares of private equity firms and reap the benefits of the high returns they earn.

Let's take a look at exactly how to do so...

Private Equity Firms Print Money, but We Can Make 2x the S&P Too

There has been talk over the years about private equity firms lowering their fees. Most of them get a 2% management fee and 20% of the profits generated by their portfolios of companies.

Unstoppable: While the markets were in a tailspin last month, the Night Trader managed to pull off a perfect track record in closed trades – all with the help of his new Infrared Index. Strike now if you want in...

The private equity firms themselves pretty much ignore the call to lower fees, and the investment community has had to go along with them for one simple reason: Private equity firms make more money than anyone else in the game.

Consider the results announced a few weeks ago by the biggest private equity firms. The lowest performance was turned in by Apollo Global Management LLC (NYSE: APO), who reported that their largest private equity fund returned about 13% over the past year. That's about twice the return of the S&P 500. The Carlyle Group (Nasdaq: CG) reported that their funds averaged 17% across the board. KKR & Co. LP (NYSE: KKR) turned in a one-year performance of 19%. And the big winner in 2018 is The Blackstone Group LP (NYSE: BX), where CEO Stephen Schwartzman reported returns in their private equity funds of over 30%.

Private equity firms are not lowering their fees for the same reason Manny Machado and Bryce Harper are not looking for pay cuts anytime soon. They perform at a very high rate, and if you want the returns, you have to pay them the money. Private equity has been outperforming for decades, and they should continue to do so for decades to come.

But when we buy shares of private equity firms, we take mutual part in these high returns.

The management and incentive fees are earnings, and most of the firms distribute a very high percentage of these earnings as dividends to their shareholders. When one of their funds cashes in big, so do we as investors.

We also benefit in another significant way. All of the big private equity firms invest their own money alongside their fund investors. That builds the asset value of the company and helps drive the stock prices over time. Since we are shareholders, their money becomes our money too. And thus, the value of our investment goes up when these companies double and triple their money over a few years.

Did You Miss This Epic Event? An undefeated strategist exposed his secret to 119 wins, 0 realized losses. Hurry – because if you don't watch the replay now, you may miss out forever…

When we buy shares of private equity firms, we become significant investors in buyout strategies, commercial real estate, private credit businesses, energy ventures, and infrastructure projects. We are owners of hotels, insurance companies, food service companies, and an incredible range of businesses. In fact, we own a huge chunk of the American economy, as private equity firms own thousands of companies and employ millions of people.

Here's When to Buy Your Next Private Equity Stock

Join the conversation. Click here to jump to comments…

Tim MelvinTim Melvin

About the Author

Browse Tim's articles | View Tim's research services

Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of Peak Yield Investor.

… Read full bio

Login
guest
guest
0 Comments
Inline Feedbacks
View all comments
LIVE
Visit Money Morning Live


Latest News

January 19, 2023 • By Money Morning Stock Research Team

These Stocks Could Go To $0

January 9, 2023 • By Money Morning Stock Research Team

The Government Is Pouring $391 Billion Into These Stocks - Buy Now

December 27, 2022 • By Money Morning Staff Reports

6 IPOs in 2023 You Can’t Afford to Miss
Trending Stories
ABOUT MONEY MORNING

Money Morning gives you access to a team of market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

QUICK LINKS
About Us COVID-19 Announcements How Money Morning Works FAQs Contact Us Search Article Archive Forgot Username/Password Archives Profit Academy Research Your Team Videos Text Messaging Terms of Use
FREE NEWSLETTERS
Total Wealth Research Power Profit Trades Profit Takeover This Is VWAP Penny Hawk Trading Today Midday Momentum Pump Up the Close
PREMIUM SERVICES
Money Map Press Home Money Map Report Fast Fortune Club Weekly Cash Clock Night Trader Microcurrency Trader Hyperdrive Portfolio Rocket Wealth Initiative Extreme Profit Hunters Profit Revolution Warlock's World Penny Nation Quantum Data Profits Live Trading Alliance Trade The Close Inside Money Trader Expiration Trader Vega Burst Trader Flashpoint Trader Darknet Hyper Momentum Trader

Ā© 2023 Money Morning All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning.

Address: 1125 N Charles St. | Baltimore, MD, 21201 | USA | Phone: 888.384.8339 | Disclaimer | Sitemap | Privacy Policy | Whitelist Us | Do Not Sell My Info

wpDiscuz