Blackstone 2Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

values are high, but the last cycle wasn’t challenging because values got too high, it was challenging because of the meltdown

“In general values are high. I think the last cycle was challenging, not so much because the values were high, which they got high in 2007, but had we not had a historic meltdown or all meltdowns, you would have had very different investment results too.”

It’s too simplistic to just look at values

“And it’s too simplistic to just look at values. You’ve really got to look at what you’re buying. And I would say — and I can’t comment on the industry because I think there’s a lot of stuff which is going for too high a price, driven by too much leverage and of course our job is to not chase those. What we are investing in and we’re finding a lot of good opportunities is companies that need capital to grow”

Markets price in growth

“it’s a little simple to just say well, that’s the bad — that Company X is a bad deal, because it’s got a 20 P/E and Company Y is a good deal because it has got a 15 P/E, when Company X might be growing twice as fast or three times as fast. So markets pay and values will reflect growth rates.”

We’re more focused on growth and don’t think that the multiples are particularly pricy for growth

“So we’re investing in much more than before, higher growth companies and that’s — and I don’t think those multiples are particularly pricy often for the growth.”

We’re also investing where we can buy assets at book

“The second area is we’re putting work and we’re putting a lot of money to work in sort of new build stuff. So we might be building a pipeline or a wind farm or a power plant somewhere and in the sense, if you look at trailing multiples, that’s an infinite multiple because we’re putting money to work in a company that doesn’t exist. But the other sense is we’re buying assets at book value and assets that we believe will earn a very nice return on equity, much higher than the cap rate if you will that we’ll sell that asset for once it’s developed. So we’ll capture not only the profit of the higher return equity while we hold it, but then we’ll get a higher multiple on sale because we’ll be selling cash flow at the higher multiple we went in.”

Everything we do is dependent on value creation

“They’re not traditional public to privates of mature companies without a lot of value creation. And in general everything we do, everything is dependent on value creation.”

If you can make 10,11,12% you’ll have good flows

“I think, if you can deliver 10, 11, 12 returns to institutions who are really focused on making 8, and if you can do it with real safety, you will have good flows there”

If we put really great talent against really great opportunities, we don’t miss much

“I think we do a pretty good job focusing on really good opportunities and getting really good talent to do it. And I think the most important thing that we have, we have to attract the best talent in the world, we have to train it, we have to get it – adapt our culture and the way we think about things and if we do that and we put really great talent against the opportunities we see, we don’t miss that much. And so we’re not perfect but we feel very confident about the opportunities on the page.”