Fortress Investment Group: Still A Buy After Huge Rally

I highlighted Fortress Investment Group (FIG) back in April 2012 when I first purchased the shares for under $4 a share. I thought the shares were significantly undervalued and the stock also provided an over 5 percent yield for income investors as well. It has turned out to be one of my better calls and investments as the shares have shot to over $7 a share since then. However, I am still holding onto my Fortress stake as the shares are still cheap, the company is undervalued compared to peers and FIG still has further upside in my opinion.
Company Overview:
Fortress Investment Group is a highly diversified global investment manager with over $55 billion of assets under management (AUM). Despite the amount of AUM, the company only has a ~$1.7B market capitalization.
Company History:
The company first launched its private equity fund in 1998 (Current AUM $15.5B). It added its credit and liquid market business in 2002 (Current AUM ~$18B). Fortress launched its IPO in 2007 and then acquired Logan Circle Partners, an established, highly scalable traditional asset management business in 2010 (Current AUM ~$22B). Fortress Investment has consistently grew AUM at an impressive rate throughout its history as it has evolved into a globally diversified asset manager.

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Taper by 'Fat, Dumb and Happy' Fed Will Hurt: Strategist

"As long as the inflation indicators keep pointing down, the Fed is sitting there with a cigar in their one hand and bourbon in their other," he said. The economy is also growing, so "it's a perfect storm" for the Fed, he said. "They'll talk about tapering, and they'd like to, but it's not in any rush."

"It's been a wall-of-worry market. People have not bought in yet. That's why the market doesn't go down," Novogratz said, adding that stocks are cheap. "If you look at the stock market today versus where it was in 2007, earnings are higher. There's no alternative investments."

Fortress' Novogratz: Fine Art Market Is a Bubble Ready to Pop

The fine art market is a bubble ready to pop, according to Michael Novogratz of Fortress Investment Group.

In fact, it will be the next gold, he told CNBC, referring to the recent plunge in gold prices.

High-priced art, he noted, shows all the signs of a bubble: speculation, high and increasing prices.

"Art is 100 percent a bubble — I mean it has all the markings for a bubble," Novogratz stated. "Prices have gone parabolic. You go to any of the art shows and you know even the cheap stuff that was $10,000 two years ago is now $80,000. The expense of art has gotten crazy."

The drop in prices when the bubble pops will be severe. "All bubbles pop, and when they pop, they come down a lot further than people think," he explained.

"These $90 million paintings, you know, they might be worth $8 million one day. They won't go from $90 million to $70 million. It will go from $90 million to $8 million."

The Federal Reserve's policy of keeping interest rates low has added fuel to the skyrocketing art market, according to Novogratz. The Fed has a "trickle-down" monetary policy because it helps the rich get wealthier from rising asset prices.

Plus, wealthy Chinese and Russians are buying expensive artwork as a means to mover their wealth overseas. Criminals around the world are buying artwork to launder their money, he said.

"That's what's really giving this its turbo charge to the art market."

At a recent Sotheby art auction, a Barnett Newman painting sold for $43.8 million, almost twice as much as any previous Newman painting, while a Gerhard Richter painting that sold for $3.6 million in 1998 was purchased for $37 million.

Many records were also set at a recent auction at Christie's that took in a record $495 million, Reuters reported.

"We are in a new era of the art market," Jussi Pylkkanen, president and chairman of Christie's Europe, told Reuters. "There is global competition that we have never seen in the art world before.

"We've reached a stage where it's very difficult to gauge prices."

Purchase prices consistently exceeded even high price estimates, Reuters reported. For instance, a Jackson Pollock painted went for $58.4 million, almost twice its pre-sale estimate. A painting by Roy Lichtenstein predicted to go for about $30 million went for $56.1 million.

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Art Is the Next Gold: Novogratz

"Art is 100 percent a bubble—I mean it has all the markings for a bubble," Novogratz said. "Prices have gone parabolic. You go to any of the art shows and you know even the cheap stuff that was $10,000 two years ago is now $80,000. The expense of art has gotten crazy."

Fortress Investment Group LLC (FIG) Ex-Dividend Date Scheduled for May 10, 2013

Fortress Investment Group LLC ( FIG ) will begin trading ex-dividend on May 10, 2013. A cash dividend payment of $0.06 per share is scheduled to be paid on May 17, 2013. Shareholders who purchased FIG stock prior to the ex-dividend date are eligible for the cash dividend payment. This represents an 20% increase over the same period a year ago. At the current stock price of $7.07, the dividend yield is 3.39%.
The previous trading day's last sale of FIG was $7.07, representing a -2.55% decrease from the 52 week high of $7.26 and a 147.2% increase over the 52 week low of $2.86.
FIG is a part of the Finance sector, which includes companies such as Franklin Resources, Inc. ( BEN ) and AMERIPRISE FINANCIAL SERVICES, INC. ( AMP ). FIG's current earnings per share, an indicator of a company's profitability, is $.13. Zacks Investment Research reports FIG's forecasted earnings growth in 2013 as 30.38%, compared to an industry average of 9.1%.