Put in $2000, then purchased:
$300 for APO
$300 for NVDA
$200 for PAX
$300 for PYPL
$917.22 for OWL
Blue Owl Capital (OWL) remains very attractive 16 P/E, 5.9% dividend yield, earnings expected to keep growing at 10-20% annually. It's the same for Apollo (APO) to some extent. The main reason is that private credit has been recently perceived as dangerous as a whole. I believe it's mostly a fear due to fear's sake.
Yes, private credit is growing much more than credit as a whole. Yes, there is no clear way to figure out the overall risk in private credit. But these two factors do not tell us there is a danger. Private credit inherently means more flexible lending. Instead of traditional credit ratings, loan-to-value ratios, and interest coverage ratios among others which allow you to describe a trillion of mortgages in a homogenous manner, private credits are often direct lendings by non-banks which look at the overall picture of the borrowers.
These non-banks offer flexible underwriting standards like the growth of the business, the industry of the business, personal guarantee, payments-in-kind, preferred or equity participation, etc. They offer fast execution and often with privacy (compared with public bonds offerings). You cannot tell the risk of Magnificent 7 as a whole, but individually you know they are all pretty solid companies. Same thing for private credits. You cannot use some simple metrics to see the health of them. You have to rely on their track records, and subtle clues from what they said (e.g. Beyond 60/40 Ep. 46: Blue Owl on Private Credit Resilience), and what deals they made (if publicly announced). That doesn't put them in the risky category. Yes, some mom-and-pop gourmet burgers may be mediocre, but overall they offer pretty delicious burgers. It would be crazy to prefer McDonald's burgers simply because McDonald's is more consistent.
In my view, there are no signs of trouble in substantial OWL's or APO's portfolios. It's all just fear because others (e.g. media) say they are risky.
Transactions
Recent and upcoming dividend distributions
Portfolio performance snapshot
Total return:
One-year return:
Portfolio IRR (calculation): 24.77%
Approximated IRR for an SPY-only portfolio: 18.27%
Individual holdings:
Breakdown by categories (real-time):
Total returns for individual holdings:
Last prices:
Portfolio holdings conviction
The convictions in the table below reflects my current opinions and will guide the future contribution of additional investment to existing holdings. Stocks not inside the table are stocks with subpar return on equity that will be very unlikely to receive more contributions from new money (there can be exceptions for very cheap stocks).
Conviction in long-term prospects means how much I believe a company would match or outperform the market (e.g. S&P 500) in the long run. Valuation matters so the conviction generally corresponds to the neutral rating of Valuation. It has the following ratings: weak, moderate, strong
Valuation: greatly overvalued, overvalued, slightly overvalued, neutral, slightly undervalued, undervalued, greatly undervalued
Brief comments on individual holdings
Most Brief analysis and latest updates are here:
AHH, AMZN, BABA, BIDU, BN, BTC, HASI, HHH, HOOD, MAIN, MCD, META, NNN, NVDA, OWL, PAX, PYPL, TSLA, TSM, UNH, XYZ, ETFs like SPY, VWO
Below are incomplete writeups:
BRK.B
Berkshire Hathaway in the current form was found by my idols, Warren Buffett and Charlie Munger. I will try to buy more if it's not very expensive.
APO
Apollo specialized in distress situations, which reduced the number of competitors. Its famous slogan is purchase price matters, which shows how price conscious they are in picking investment. It has another slogan "we want 25% of everything and 100% of nothing on the asset", which is a goal post of the company about engaging in a lot of asset managing transactions even for other asset managers. It's a good way to position the company to have a large adjustable market. Their use of reinsurance company, Athene, helps them to grow assets under management effortlessly as well.
[2025/04/04] Expected 2025 EPS is $8.3, so P/E around 13.25, pretty cheap with an expected growth of 10-15%. 1.68% dividend yield helps a bit as well.
BAM
The pure asset management company part of the Brookfield Corporation. With BN, BAM can grow its asset under management (AUM) easily. Oaktree Capital, founded by the famous Howard Marks, is part of it, so it's very reputable.
The management has already indicated they are locked in to grow its cash flow 15% annually for the next field years. Its management fees do not rely on performance that much, so they are stable. With an expected 2023 EPS of $1.39, P/E 25 is not cheap, but with the help of 3.8% dividend yield (close to 100% payout, thanks to the asset light business model), there is a fair chance the stock can return 15% annually.
BX
A very reputable company in real estate. Its management fees rely on performance much more than Brookfield, but Blackstone has a track record, so I am not too worried about it.
Expected 2023 EPS is $4.36, P/E ~ 21. A 3.5% dividend yield with expected annual growth of 10-15%, this stock can potentially get a 15+% return in the long run.
