Bryn Talkington Buys KKR and Apollo Amidst Market Volatility

Investment Thesis for KKR and Apollo

• 💡 Bryn Talkington, Managing Partner of Requisite Capital Management, is buying KKR and Apollo despite their recent stock declines.
• 🎯 She notes that both companies' stock charts resemble tech stocks, indicating a separation between price and fundamentals.
• 📈 Both KKR and Apollo are growing revenues and earnings in the low double digits and are expected to capitalize on the increasing interest in alternative investments.
• 💰 Talkington views the current sell-off as a great opportunity to add to these positions, anticipating significant price appreciation in one to two years.

Market Risks and Counterarguments

• ⚠️ A key risk highlighted is that in a volatile year similar to 2018, investors may be hesitant to commit capital to private markets and loans.
• 💬 Talkington counters this, suggesting that institutions will remain invested in private equity and credit, making these businesses fundamentally sound.
• 📊 However, there is a question mark around whether the growth fueled by the "democratization of alternatives" will materialize, with some family offices and RIAs expressing caution.

Understanding Private Equity Stock Performance

• 🔍 The analysis of private equity stocks is complex, with factors like the IPO market and underlying portfolio company performance impacting valuations.
• 🚫 A stalled IPO market and uncertainty about underlying assets can lead to significant market cap losses for publicly traded private equity firms.
• 🧩 Investors need to look beyond just the stock price decline and analyze the specific underlying investment themes and holdings within private equity funds, as not all are performing equally.
• 📈 The significant drop in market cap for top publicly traded private equity firms like KKR, Apollo, and Blackstone suggests a broader market sentiment shift or a reassessment of their business models and exit strategies.