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Blackstone is a top pick in financials ahead of a potential Fed pivot, Morgan Stanley says


It’s time to buy Blackstone as investors prepare for a pivot from the Federal Reserve, according to Morgan Stanley. Analyst Betsy Graseck named the private equity giant a top pick in financials, with an overweight rating, saying the stock is attractive entry point after its decline this year. Shares of Blackstone are down nearly 32% in 2022. “We add BX to our Financials’ Finest list, given attractive entry point on a longer term view with shares trading at a low teens P/E multiple on normalized earnings, for a best-in-class franchise with unrivalled product breadth and distribution capabilities that can grow faster than the market expects,” Graseck wrote in a Wednesday note. The stock was hampered this year by a challenging macro environment that the analyst expects will continue to be an issue in the months ahead. Still, the analyst expects that Blackstone is a “long-term winner” that investors will turn more positive on as the Federal Reserve winds down their aggressive interest rate hiking campaign. The analyst pointed to Blackstone’s skew toward fee-related earnings that should support earnings for the asset manager, as well as protect against downside. The asset manager also has $180 billion in dry powder, according to the note. “While we remain cautious generally on asset mgrs over the next 3-12 months given the volatile and less certain macro environment, we are poised to be nimble on early cycle opportunities and thus selectively adding risk to our Financials’ Finest list with the addition of BX as we prepare for the pivot and peak rates,” Graseck added. Separately, the analyst removed LPL Financial from the Finest Financials list after downgrading the stock to equal weight from overweight. The analyst said that peak interest rates could mean a multiple derating going forward. –CNBC’s Michael Bloom contributed to this report.

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