Blackstone Group is a mega-billion-dollar money management firm that has the potential to eclipse every other financial institution once it
. Most people think of Blackstone as a pure private equity fund, but the reality is that Blackstone set up a hedge fund,
, in 2006 to invest in public securities.
Blackstone is privy to an enormous amount of information thanks to its various ownership stakes in companies as well as its relationships with all of the investment banks. It makes complete sense for Blackstone to use this information to make money by investing in public equities.
Not only does it invest in public equities, but Blackstone Kailix has fewer than 30 holdings, a very focused number compared with the typical hedge fund. In other words, Blackstone is making big bets on each stock. Presumably, each of those bets is based on information it has that's probably exclusive to its extensive network of contacts.
On its Web site, Blackstone Kailix even states: "Access to high level contacts at corporate, financial, and public organizations should also support the group's investment activities."
Here's why Blackstone Kailix is the ideal type of fund to piggyback:
- It takes focused positions, meaning it researches heavily before making a decision.
- It has enormous access to information.
- It seems like a long-term holder, based on the information from its past few regulatory filings.
First off, it seems as if Blackstone's making a long-term bet on a continued rise in oil and energy prices. This type of investment is similar to that of "peak oil theorists," who believe that the planet is slowly running out of oil. In fact, there is strong overlap between Blackstone's portfolio and the portfolios of
, whose investments tend to be bets against the U.S. dollar.
All three funds (Blackstone, Pickens, Soros) count
among their holdings.
Transocean does offshore contract drilling for oil and gas wells. Its expected growth is enormous, with analysts predicting earnings to climb from $7.32 a share in 2007 to $11.07 in 2008. Not bad for an $82 stock.
Transocean also appears in various portfolios containing Jim Cramer's picks, including a portfolio set up by a Stockpickr user who is
. Jim also mentions Transocean as a
in a video recorded on March 2 for TheStreet.com TV.
Another top Blackstone oil-related pick that is also shared by Pickens and Soros is
. This stock, too, is expected to have a huge jump in earnings over the next year. Analysts expect earnings to grow from $3.77 a share in 2006 to $7.18 in 2007 and $9.12 in 2008.
Both Transocean and GlobalSantaFe are listed as two deepwater drillers that Jim Cramer likes in
, a portfolio based on
"Stop Trading!" segment from March 16.
But Blackstone is not all about oil. It also has a semiconductor play in
Applied Mico Devices
. Applied Micro makes all sorts of chips for the storage and telecom industries. This is a company that has never really recovered from the tech implosion.
Applied Mico Devices (AMCC)
Although it's trading near the top end of its range now, it's poised to break into profitability with a forward price-to-earnings of 25 expected next year vs. losing money last year. The company has a stellar balance sheet with $261 million in cash and no debt.
Additionally, Blackstone is not the only one betting on an Applied Micro recovery. Former Soros protege Michael Karsch owns the stock through his
. Applied Micro also appears on the list of top-ranked
It's fascinating to me that of all the possible chip plays, Applied Micro is the one for Blackstone. It owns one million shares of Applied Micro, representing 0.66% of its $539 million portfolio. So it's not a huge bet, but it's worth paying attention to.
Most of Blackstone's other bets are in the energy space, including some alternative energy plays, such as
Suntech Power Holdings
Unrelated to the Kailix fund, it's also worth noting that Blackstone operates two closed-end funds, perhaps representing some global macro bets. It runs
The India Fund
The Asia Tigers Fund
For all of its holdings, check out the entire
portfolio on Stockpickr.
At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.
James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of
Trade Like a Hedge Fund
Trade Like Warren Buffett
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;
to send him an email.
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