OOH …Here’s One Thing
A Taste of Honey
Managing Director, Johnsen, Fretty & Company
https://youtu.be/gRGOm071sE0?si=dWnV3mII0M3uf4Bk
Anyone else pumped for the back half of September and October?!!
With all this global warming going on, it’s like summer without the oppressive heat and the amateur crowds.
As Neil Young once said:
Will I see you give more than I can take?
Will I only harvest some?
As the days fly past will we lose our grasp
Or fuse it in the sun? …dream up dream up…
Which is an excellent segue, ehem, if I do say so myself. There was a less than flattering article on the private equity industry in this week’s Barron Magazine.
Private equity industry
Just a guess but it’s probably not your first go to for all the news that’s fit to print (not mine either), and even if you are fan like myself, an article titled “How Private Equity Stacks Up Against the Stock Market”, buried half way through the magazine (…and why the hell do they call it a magazine since its a newspaper…) most likely didn’t catch your eye. So I will cherry pick some of the most pungent one liners from the article, which I hope you enjoy as much as I did:
“Joshua Rosner, an adviser to regulators and co-author on Plunderers, tells me that private-equity returns are no better than those for index funds after fees.” (JJ: wait you mean all that huffing and puffing and smoke but no fire?)
“Private-equity firms are go-betweens that raise money from sophisticated investors for funds that buy companies in whole or part. Clients typically commit capital for 10 years: three to do deals, four to cultivate assets, and three to get out. Fees generally range from obnoxious to appalling—say, 1.5% to 2% of assets a year plus 20% of profits over a minimum rate.” (JJ: how else am I going to pay for my house in St. Barths?)
“David Rubenstein told me last year that deal prices have crept up. “When the buyout world first started, you would buy things at seven, eight, or nine times cash flow,” he said. “Now you’re seeing people buying things at 13, 14, 15 times cash flow.”” (JJ: If that’s the case then they should be paying 18x for safer outdoor assets!)
“Ludovic Phalippou at the University of Oxford says that private-equity fund buyers believe in “Alpha Claus”” (JJ: Aka hope is not a strategy)
“When Phalippou calls private equity a “billionaire factory,” he means the founders, not the clients.” (JJ: Remember St. Barths ain’t cheap)
“His own work on long-term returns for buyout funds suggests that they outperform stock indexes by three percentage points a year after fees.” (JJ: That’s still a lot of huffing and puffing for 3 yards and a whole lot of dust)
“Andrew Palmer, chief investment officer of the Maryland State Retirement and Pension System, who attributes his handsome private-equity returns to the ability of these funds to control companies. “If you’re an investor in public stocks, you have no impact on the outcome,” he says.” (JJ: True some of these LP’s have drunk the kool aid and still enjoyed the party.)
“Stock buyers needn’t feel left behind if they flunk the income, wealth, or sophistication tests needed to pass the rope line for private equity. A Harvard Business School study found that investors can beat the performance of buyout funds using small-cap value funds to replicate the style, brokerage loans for the leverage, and homemade hold-to-maturity accounting to keep down the volatility. I’d stick with all-caps and skip the borrowing, but point taken.” (JJ: As the famous investor for the Yale Endowment, David Swensen once said, kids don’t try this at home).
Oh, Have I Got Your Attention Now?
Thanks for the op-ed Johnsen, but Who…G.A.S.? Well for one, since your (and my) industry is fueled by private equity, whether you like it or not, you should give more than one tootie. Don’t trust me? Take a look at this excellent list B.I. put together some time ago:
Billboard Insider’s 2023 List of Out of Home Equity Investors | Billboard Insider™
Any idea who owns a significant stake in Branded Cities, Big Outdoor, New Tradition, Pearl Media and Adams Outdoor, Trailhead Media, Premier Outdoor, TierOne Media, AllOver Media, Captivate…to name just a few? You guessed it, private equity.
As Alec Baldwin once said, “Oh, Have I Got Your Attention Now?” https://youtu.be/r6Lf8GtMe4M?si=DfCkCYs1EDmRqs8q
I will leave it to you to figure out the connection between the song and the merde above.
Start your week in the right direction with this Herman Hesse quote: “Learn what is to be taken seriously and laugh at the rest.”
- Link to full Barron’s article: How Private Equity Stacks Up Against the Stock Market | Barron’s (barrons.com)
Securities transacted through StillPoint Capital Member firm FINRA/SiPC
Johnsen, Fretty and Co. is an advertiser with OOH Today