Fogel Capital takes a look at KKR & Co. Inc.

If you’re a retail investor, an individual who invests for his or her own personal account, private equity powerhouse KKR & Co. Inc. is one of the most attractive investments you can make. To fully understand why, let’s take a look at the history surrounding this firm, the private equity culture altogether, and how KKR & Co. is leading the way in its sector.

In the 1970s and 1980s, KKR universalized the concept of a leveraged buyout. In fact, they were known as the “barbarians” of Wall Street due to their $25 million dollar buyout of RJR Nabisco in 1986. Although this acquisition was surrounded with negative implications of tax avoidance and aggressive use of debt, KKR set the stage for private equity firms buying out massive corporations in hope of even larger profits. From a present-day point of view, the acquisition of companies is not KKR’s most precedent concerns.

Rather than buying companies and stripping costs to look for profit, KKR is invested in improving the management and performance of the companies they attain. One example of this incentive can be seen through their 2005 push for a “green portfolio”, which focused on managing their subsidiaries’ waste, greenhouse gas emissions, and water consumption. These conservation efforts are one of many progressions in which KKR is putting money back into the companies they acquire, and the success they are finding is unmatched.

Despite the attractive quality of investing in firms that do right for the world and the workforce, the utmost importance when investing is linked to the company’s ability to make a profit. The massive cultural changes in KKR occurred alongside structural changes that make it an extremely profitable investment for the retail investor. The first structural change was adopted as a response to the financial crisis, in which KKR converted from a partnership to a corporation. From an investor’s point of view, this eliminates the troublesome K-1 tax form. Additionally, KKR has restructured its dividend payout model to a smaller percentage of after-tax earnings, confirming they will retain higher profits than competitors. The “power of compounding” is the real secret to finding profit here. Similar to the Warren Buffet approach, accumulating capital by reinvesting dividends is the main focus for KKR, which now owns over $10 billion worth of investments on its balance sheet. These restructures have proved so successful, that another private equity giant – and one of KKR’s main competitors – the Blackstone Group, has followed in the same footsteps.

While preparing for the long term, investing in stocks like KKR can be the key to enjoying a happy retirement. Not only are they accessible and reasonable for any investor, but there are also countless advantages to investing in dividends. Over a long period of time, reinvesting your dividends back into the company will allow for an even higher percentage of growth. At Fogel Capital Management, Inc., we can implement this analysis to your portfolio and design an investment strategy to achieve your financial goals. Call Fogel Capital today at (772) 223-9686 for a free portfolio consultation.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply