Ares Management is Thursday's IBD Stock Of The Day as the alternative investment manager puts to work $111 billion in 'dry powder' to keep fueling fast earnings growth. ARES stock, after surging to a record high on Q4 results last month, is close to a buy point.
On the heels of its Feb. 8 Q4 report, JPMorgan raised its price target for overweight-rated Ares Management to 141 from 119, calling it "among the most surefire" ways to invest in the private credit industry.
Ares Earnings Results
Ares was cofounded in 1997 by Tony Ressler, also the co-founder of Apollo Global Management.
The firm's assets under management grew 19% to $418.8 billion in Q4, helping to drive a 39% increase in EPS per Class A share to 86 cents.
On the Q4 earnings call, CEO Michael Arougheti said that Ares had its second-largest fundraising year despite a difficult year for fundraising across its industry. "We entered 2024 in the enviable position of having more than $110 billion in dry power to invest in what we believe is an attractive vintage, providing the opportunity to drive strong earnings growth in the years ahead."
Arougheti said Ares had proved its resilience in tougher, slower markets, but highlighted a "more promising" outlook with a lower interest-rate outlook for 2024.
Ares CFO Jarrod Phillips announced a 21% quarterly dividend increase to 93 cents a share, attributing the hike to the 19% increase in management fees in 2023 and "strong growth prospects" for this year.
Ares is a diversified alternative asset manager, engaged in direct lending, private equity, and investment in infrastructure and real estate. However, the firm is underweight office buildings, which comprise just 4% of its real estate portfolio. However, Ares recently formed a joint venture to invest in "high-quality distressed office buildings in New York," looking for favorable deals amid scarce capital for that particular asset.
Ares Management Stock
Ares stock slipped 1.25% to 133.03 in Thursday afternoon stock market action. However, Ares stock is finding support at its 21-day exponential average.
After surging on its Q4 earnings report, Ares has been etching out a consolidation that could become a flat base. That base will have the minimum requisite five weeks as of Friday, making the 139.48 flat-base buy point official.
Investors could take advantage of an early-entry opportunity, if Ares breaks the trend line sloping down from its Feb. 8 high. A move past the March 6 high of 137.47, ideally on above-average volume, would flash a buy signal.
Ares is ranked No. 3 in the Finance-Investment Management industry group, according to IBD Stock Checkup. Apollo Global Management, the top-ranked firm, is part of the IBD Leaderboard portfolio of elite stocks.
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