Och-Ziff Capital (OZM) is one of few alternative asset hedge funds publically traded that actually submits financial reports to the SEC even though it is not a requirement. The stock was crushed during the October 2008 crisis but has since started to rebound. The 4th quarter results were positive and this is a high dividend stock with significant growth potential.
Och-Ziff Capital Management Group LLC is a leading, global institutional alternative asset management firm. It seeks to deliver consistent positive risk-adjusted returns throughout market cycles, with a strong focus on risk management and capital preservation. Portfolio composition is determined by market opportunities rather than any predetermined commitment to investment discipline or geography. Their diversified, multi-strategy approach is based on global investment strategies, including merger arbitrage, convertible arbitrage, equity restructuring, credit and distressed investments, private investments and real estate.
OZM is currently trading just under $15.00 per share. The stock has been in an uptrend from October 2008 at a price around $4 per share to nearly $15.00. The chart looks good as the increase was a consistent upward trend with few price spikes. OZM has a market cap of $1.2 billion. The stock has a trailling PE of 16 and a forward PE of 11.5. With a growth rate of 15%, the PEG ratio is at 1 or below as earnings continue to increase. Estimated EPS for 2010 is $1.26 per share while 2011 estimates are at $1.59 per share.
For dividend lovers, OZM pays $2.32 in annual dividends. That is a dividend yield slightly above 15% in a stock with a 15% growth rate. You will not find many situations with this type of dividend with a growth rate. The Wall Street consensus is that OZM is a strong buy at this time.
Recent results indicate that OZM has experienced an increase of money flows into the managed headge funds. OZM saw $305 million of inflows during the fourth quarter and has raised roughly $650 million so far this year. The more money under management the more profits to be made from fees.
Och-Ziff was hit hard in 2008 as the hedge-fund industry got swept up in the financial crisis. The firm’s main OZ Master Fund lost more than 15%, and assets under management dropped by $11.1 billion, while Och-Ziff shares slumped roughly 80%. However, Och-Ziff’s funds rebounded strongly in 2009, with the OZ Master Fund up more than 23% and the firm’s Asian fund gaining a record 34%. Like many other hedge-fund firms, Och-Ziff was in a tricky position after suffering losses in 2008. Most firms in the industry charge annual management fees of about 2% and take another 20% or so of any profit each year as a performance or incentive fee. However, when funds lose money, they usually miss out on incentive fees until losses are recouped and returns climb back over the previous high, known as the high-water mark.
Och-Ziff’s returns in 2009 got the firm’s funds back over their high-water marks and incentive fees kicked back in. The firm collected $345.6 million from such fees during the fourth quarter. That was up from $6.7 million in the fourth quarter of 2008. Revenue from Och-Ziff’s funds business totaled $440.6 million in the fourth quarter, more than three times higher than it was in the year-earlier period.
OZM will continue to rebound as the economy improves and more cash flows back into hedge funds. At $1.59 earnings in 2011, this stock could move up to around $25 per share. This results in an increase of 67% over two years with a dividend yield of 15%. the total return will be near 100% if OZM hits the expected EPS in 2011.
Read more Greg Group at Master Achievement.