Amit Chokshi

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  • Here We Go Again - Sowood Manager Launching New Fund
    Why rip on guys that get a second chance? Didn't the great Bill Ackman blow up when he ran Gotham yet now he's idolized by all of these value investors.
    May 04 21:37 pm |Rating: 0 0 |Link to Comment |View article
  • Does the Recent Spate of Buyouts Signal that Stocks are Underpriced?
    The megap PE funds have given up on returns based investing for years and have generally focued on cash on cash returns, basically a double in 5 years. These funds have had billions to invest in their predecessor funds, too. They have been doing billion dollar deals for a while, whether it's Carlyle, Blackstone, TH Lee, KKR, Permira, these firms all had multibillion dollar funds before this was front page news. Now that they are closing or have raised double digit billions people are turning to see what's going on but the same stuff happened in 1998 with headline capital raised only to see firms like Hicks Muse and Forstmann Little crash and burn a few years down the road due to bad investments.

    Even with stocks fairly valued, with high yield and leveraged loan markets pricing risk so low in recent years, PE firms can still pay a fair price and make killer returns. The point is really seeing if the returns are that great on a risk adjusted basis. Leon Cooperman of Omega did his own study back in the 80s which showed if you levered the S&P500 to the same capital structure of typical LBOs, it would beat average PE fund returns. I also believe Prof Kaplan at U Chicago has done some research questioning how strong PE returns really are.

    PE funds just take the "market" aspect out of the companies they buy, add some leverage and wait for the returns to be generated. I think the biggest reason it's so easy for PE funds to take these cos private is because investors are so myopic and will take a 20% premium rather than allow management/company to continue doing what they are doing and ultimately wait for the market to assess a higher valuation.
    Nov 24 22:08 pm |Rating: 0 0 |Link to Comment |View article

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