Q: I own both KKR and BN. KKR stock price is appreciating significantly more than BN and all other stocks in the private equity realm, that I am aware of. Can a case be made to concentrate on KKR if one is not concerned about including BN to have Canadian exposure? Further, do you see any other financial stock with more pure growth potential relative to KKR?
5i Research Answer:
If we were to choose another today, it would be BN. It is not exactly a wallflower, being up 62% in the past year. Of course, KKR is up 112%. KKR is about 35% larger, and about twice as expensive on valuation. But P/E is not always a great metric in this sector, as results depend on deals and monetization of assets. With better momentum, and if one does not care about geographic location (note BN is based in Toronto but its business is very global) we could make a case to concentrate on KKR if one wants the momentum trade. But we do like diversification, and would be very comfortable owning both right now.