Mitt Romney lost the election and now is back at doing what he does best: making millions in private equity. And he’s laughing all the way to the bank…
What is private equity? It’s an investment in companies that aren’t publicly traded, private corporations before they go public or are bought out by bigger companies. This is where the big money is often made, as Mitt Romney proved with Bain Capital.
But Bain Capital is not open to the public. (Type in the symbol “BAIN” and nothing comes up.) But not to worry. Lucky for us, there are a few publicly traded private equity firms just as profitable – if not more – than Bain Capital.
Examples include Blackstone Group (NYSE: BX), Carlyle Group (Nasdaq: CG) and Apollo Global Management (NYSE: APO), all master limited partnerships.
Interestingly, all three of the above private equity firms have skyrocketed since the November elections, up 30% or more… and in my judgment, have more room to grow.
Like hedge funds, private equity firms have a great deal of flexibility. They can invest in business development companies, residential and commercial real estate, senior floating prime rate loans and other forms of credit. Right now many of them are buying up foreclosed properties in California, Arizona and Florida – and making a bundle.
Business development companies (BDCs) are a specialized form of private equity also doing well. They are investment companies that provide loan and equity capital to private growth companies. The best performers are Main Street Capital (NYSE: MAIN), Apollo Investment Corp. (Nasdaq: AINV)and Prospect Capital (Nasdaq: PSEC). Like REITs, they pay out 90% of their profits in high monthly or quarterly dividends.
Full disclosure: I’ve been recommending MAIN in my newsletter, Forecasts & Strategies, for a year now. It just beat expectations, and paid out a special $0.35 dividend in January. It increased its dividend four times in the past year.
Yet it’s still surprisingly cheap, selling for less than eight times forward earnings, and a PEG ratio of less than one (considered excellent).
Several other companies are selling for only slightly above book value, and one, American Capital (Nasdaq: ACAS), is selling for below book.