Ares stock is the IBD Stock Of The Day as the global investment manager rises near a buy point after smashing fourth-quarter views on the back of rising demand for alternative investments.
On Feb. 11, Ares Management handily beat earnings and revenue estimates for the December quarter. Key financial metrics — including assets under management (AUM), fee-related earnings and after-tax realized income — all rose more than 50% year over year.
"Both institutional and retail investors are seeing the benefits of the higher returns and lower volatility that we generate with our alternative investments," said Ares CEO Michael Arougheti in an earnings release.
In what Arougheti called a "transformational year," the company topped $300 billion in AUM for the first time in 2021, also acquiring Landmark Partners and Black Creek Group.
Founded in 1997, Los Angeles-based Ares offers products and services across the credit, private equity, real estate and infrastructure asset classes. Far-larger rival Blackstone is on the IBD Leaderboard watchlist, a curated list of stocks with the most potential for big gains.
Alternative investments help to diversify portfolios and reduce investing risk. They're often used by high-net-worth individuals.
Investors should be very cautious about buying stocks in the current volatile market. But it's a good time to be building watchlists.
Ares Stock Technical Analysis
Shares of Ares Management fell 1.6% to 78.64 on the stock market today, reversing lower for a third straight session but still holding above the 50-day line. Ares stock is trading modestly below an 84.20 buy point from a double-bottom base.
Much of the base has formed below the 50-day line, a negative. Still, Ares stock found support at the 200-day line in late January, something most equities and indexes have struggled to do.
On a weekly chart, the relative strength line for Ares stock has risen sharply in this young year after a slide in late 2021, according to MarketSmith chart analysis. The RS line, which peaked in November 2021, shows a longer-term uptrend.
Blackstone stock sank 1.9% to 121.20 on Monday, further undercutting the 50-day line. Shares have formed a new 139.05 handle entry after briefly breaking out from a double-bottom base with a 136.56 buy point. Among other alternative asset managers, Carlyle Group dipped 0.4%, KKR lost 3.5%, and Bridge Investment Group retreated 5%.
Ares stock's IBD Composite Rating, which combines key fundamental and technical metrics in a single easy-to-use score, is a superior 95 out of 99.
Its Relative Strength Rating is a strong 93. That means it has outperformed 93% of all stocks in the past year.
Ares stock boasts growing institutional support, with 510 funds owning shares as of December, up from 442 in March.
Ares Earnings and Fundamentals
In Q4 2021, Ares earnings rebounded 57% year over year to 85 cents per share as revenue bounced 55% to $870.6 million. For the full year, earnings increased 38% and sales rose 29%, according to FactSet.
Ares earnings are expected to grow further in 2022 and 2023, though slowing from 2021's pace, FactSet says.
The financial stock sports a solid EPS Rating of 80 out of 99.
Over the last three quarters, Ares' earnings growth ranged from 29% to 64%, while sales grew 17% to 56%. Those numbers are mostly above the 25%-or-higher threshold a CAN SLIM investor would want to see. Both earnings and sales growth sharply accelerated in the latest quarter.
In 2021, the $24 billion Ares Capital fund (ARCC) gained 4.6% in the final quarter and rose 22% for the full year, according to a company presentation. It invests in credit and direct lending.
A strong dividend stock, Ares shares offer a 61-cent quarterly payout, yielding 3.1%.
On Feb. 4, Ares Acquisition, a special-purpose acquisition company, announced the closing of an upsized $1 billion initial public offering. A subsidiary of Ares Management, Ares Acquisition trades under the ticker AAC. It seeks to merge or combine with one or more businesses.
Last year, Bloomberg reported that the Equinox gym chain said it is in talks to go public through a merger with Ares Acquisition.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
