NEW YORK ( TheStreet) -- Following significant pullback, this is a good time for investors to pick up shares of Kohlberg Kravis Roberts & Co. ( KKR) and Apollo Management, LLC ( APO), according to Oppenheimer analyst Chris Kotowski. Shares of KKR closed at $18.30 Wednesday, down 14% from their recent intraday high of $21.33 on April 26. APO closed at $22.64 Wednesday, down 18% from their intraday high of $27.50 on May 7. In a note to clients late on Wednesday, Kotowski wrote that "we can't find any news to account for the declines," and that the stocks were likely down for two "bad" reasons. First, "yield stocks are out of favor," he wrote, and second, "APO's CEO was quoted at a conference saying that they were 'selling everything that isn't nailed down.'" "No. 1 is a bad reason because while the private equity (PE)-oriented asset managers do in fact have good yields, they are primarily equity, not fixed-income, vehicles. No. 2 is a bad reason because selling things is how they realize revenues," Kotowski wrote. "We think the stocks are attractive valued at roughly 7x
distributable earnings, he wrote.
Kotowski estimates that distributable earnings for APO will total $3.01 a share in 2013, declining to $2.82 in 2014. Based on his estimates, APO's stock trades for 7.0 times enterprise value. The analyst on Wednesday lowered his price target for APO to $32.50 from $34, but the new price target still represents potential upside of 44% for the shares. For both companies, investors are concerned that there may be a slowdown in distributable carry and gains for investments made at huge discounts before 2010, "but since 2010 these two companies have deployed more than $27B that is likely to generate future carry," Kotowski wrote. -- Written by Philip van Doorn in Jupiter, Fla. >Contact by Email. Follow @PhilipvanDoorn