Partners Group: attempting a dynamic breakout
For some time, the private equity firm’s stock has been moving within a broad sideways corridor. Yet the publication of the company’s half-year results is breathing new life into the SMI member, making this the perfect time for leveraged speculation. Intrepid investors will find attractive solutions on Swiss DOTS, Switzerland’s leading OTC marketplace for leveraged securities.
The Partners Group share price has not trended in any particular direction for a long time. Just over a year ago, the SMI stock attempted to break through the CHF 1'000 barrier on several occasions between mid-August and mid-November, yet ultimately failed to reach four figures. This created a resistance zone with an upper limit of CHF 1'059, its highest point over the past year. Yet this is only one of the stock’s “ceilings”, as a second, extremely broad resistance range of between CHF 840 and CHF 940 emerged over the next few months. The share price nudged up and then down before turning back in the opposite direction again — with the exception of a few brief spikes.
Bullish investors recently took charge once more to temporarily halt the stock’s oscillating movements. On a single day, the share price closed more than 10% higher to break through several horizontal barriers within the aforementioned broad sideways corridor. This dramatic surge pushed the blue-chip stock to the upper limit of its resistance zone. Only time will tell whether the optimists will finally prevail over more bearish investors this time around. The bullish view is still being supported by moving averages, which have surpassed both the 100-day and 200-day lines and are now moving upwards in unison.
Accelerating growth
The Swiss blue-chip stock has also had a helping hand on the operations side, with its half-year figures — or more specifically, the outlook for the second half — providing the catalyst for this short-term rally. While the private markets investment manager’s new commitments fell from USD 13.1 billion in the previous year to USD 8.0 billion in the first half of 2023, the company expects growth to accelerate significantly during the rest of the year.
Partners Group senior manager Sarah Brewer paints a hopeful picture, saying: “Over the past two months we have seen institutional investors focusing again on investing in private markets and we expect this trend to continue throughout the second half of the year.”
The firm expects to collect gross client commitments of USD 17 to 22 billion for the full year 2023 for its largely tailor-made investment solutions.
Recapturing past strengths
Assets under management rose by 9% to reach USD 141.7 billion at the half-year mark. While this is still well below the average annual growth rate of 13% for the past five years, it beats Zürcher Kantonalbank’s estimate of USD 140 billion. The global private markets investment manager is also looking to regain its former strength. The Board of Directors expects its more than 1'800 employees in 20 branches worldwide to grow assets under management by an average of 10% to 15% per year in the medium term. As a member of Partners Group’s senior management, Brewer already has a plan for how the firm can achieve this, and is focused on introducing new solutions for individuals. “Today, these investors have less than 1.5% of their total assets allocated to private markets and we see significant potential for them to increase their exposure to closer to 5% over time,” she explained.
After more than two decades in the market, Partners Group is also aiming to expand its solutions into different asset classes and strategies including next-generation infrastructure, private debt, growth-oriented equity, and a multi-asset class mandate aimed at directly impacting the United Nations Sustainable Development Goals.
Moderate valuation
After a 29% decline in profits last year, analyst consensus now expects the company’s earnings per share to record moderate growth of 8% once more in 2023. Double-digit percentage growth rates are then forecast for 2024 and 2025, with profits expected to rise by 13.9% p.a. on average. As a result, the 2024 P/E ratio of 17x does not look excessively high, especially as the stock has been valued at over 20x in the past. It therefore comes as no surprise to learn that the majority of analysts are giving the stock the thumbs up, with a current average price target of CHF 990.
Investment solutions
Similarly bullish investors could exploit the current momentum and venture a leveraged speculation. A total of 262 leveraged products for Partners Group are listed on Swiss DOTS, of which 176 are long and 86 are short products. The call warrant (Valor 11721742) from UBS is perfect for risk-tolerant investors looking to speculate upward towards a four-figure share price. With a strike of exactly CHF 1'000, this product currently has the lowest spread of any warrant on Swiss DOTS at 3.9% and a term that runs until the end of the year. This pathway to a four-figure share price also has a leverage factor of 9.1.
The mini-long (Valor 125392889) issued on Swiss DOTS by BNP Paribas, which can be traded on trading days between 08:00 and 22:00, has an open-ended structure and leverage of 3.75. The stop-loss, which is always adjusted on the first of the month, is CHF 766.38 and thus allows more than 19% on the lower side for consolidated shares in this SMI stock. Unlike the warrant, the recent surge in volatility has hardly any impact on the pricing of this product.
A short product would be the most appropriate solution in the event that Partners Group shares once again fail to break through the aforementioned barrier. One product worth considering is the mini-future (Valor 117496254) from Bank Vontobel, which offers leverage of 6.0 and a stop loss of CHF 1'067.08. In this case, the buffer is around 12%.
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