Investment firms such as Apollo Global Management (APO) are experiencing a surge in stock prices, indicating Wall Street’s optimism for increased deal making opportunities. Despite the current sluggish climate for mergers and acquisitions, some investors believe that deal activity has reached its lowest point and anticipate a busier future.
Oppenheimer analyst Chris Kotowski shares this sentiment, stating that the market has stabilized rather than continued to decline. He believes that the next move in deal activity is more likely to be an increase rather than a decrease. Apart from Apollo, Kotowski also recommends investing in shares of Blackstone (BX), Carlyle Group (CG), GCM Grosvenor (GCMG), Hamilton Lane (HLNE), KKR (KKR), Blue Owl Capital (OWL), and P10 (PX). Despite experiencing a 30% loss in 2022, these asset managers within his coverage group have outperformed the S&P 500 by three percentage points so far this year.
The confidence displayed by these firms suggests that they have the necessary resources to pursue deals. Kotowski’s research reveals that for every dollar investors spend on an asset manager, the firms in his coverage group possess an average of $2.15 in “dry powder,” which comprises private equity and real assets. Given the ongoing uncertainty in the macroeconomic landscape, private equity investors can take advantage of more favorable valuations and allocate funds accordingly.