The Blackstone Group Could Profit From the Pandemic

The Blackstone Group Inc. (BX) is likely to profit from the coronavirus pandemic in coming years, reopening the 2009 and 2010 playbook when the company stepped in and bought thousands of foreclosed properties. Although it’s still too early to take exposure, the stock is now approaching deep support levels after a 38% one-month decline into this week’s nine-month low, potentially setting up a buying opportunity for aggressive portfolios.

The financial services company is now the world’s largest alternative investment firm, with more than a half trillion dollars under management. With offices all over the world, Blackstone is perfectly positioned to find the most profitable buyout plays as the pandemic wrecks damage on businesses and corporations. However, the firm needs to get its own house in order first due to stakes in many companies that are getting pummeled right now.

BX Long-Term Chart (2007 – 2020)

Blackstone came public at $38.55 in June 2007, just four months before the mid-decade bull market topped out, and entered a steady decline that found support in the mid-teens in March 2008. It broke down in October, carving a volatile decline that finally ended at an all-time low near $3.50 in February 2009. The subsequent bounce stalled near the .382 Fibonacci sell-off retracement level in 2010, marking resistance that took more than three years to overcome.

A 2013 breakout attracted sustained buying interest, lifting above 2007 resistance in 2014. The upside continued into May 2015, topping out in the mid-$40s, ahead of a correction that cut the stock price in half into the first quarter of 2016. It tested the low in July and November, completing a triple bottom reversal at the same time as the presidential election. However, upside into 2018 was unimpressive, failing to reach the 2015 high.

The stock fell to a two-year low in December 2018, marking a buying opportunity ahead of steady upside that finally reached four-year resistance in June 2019. It broke out immediately, carving an impressive uptrend, underpinned by strong accumulation. The advance stalled and reversed in January 2020 when the outbreak hit world headlines, yielding a downtrend that went vertical last week, dumping the stock more than 31% in just five sessions.

The monthly stochastic oscillator entered a long-term sell cycle in February 2020, predicting weakness into the summer months, but the current trajectory may be unsustainable. In addition, the decline has now landed on long-term support at the 50-month exponential moving average (EMA) and .618 rally retracement of the four-year uptrend. It’s also holding relatively close to the failed 2019 breakout above the 2015 peak, raising odds for a successful defense of support.

BX Short-Term Chart (2018 – 2020)

The on-balance volume (OBV) accumulation-distribution indicator hit a six-year low at the end of 2018 and entered a strong accumulation phase, reaching the 2015 peak in the summer of 2019. Buying pressure eased in September, giving way to a holding period that posted a slightly higher high in January 2020. Despite these mixed OBV messages, there’s been remarkably little selling pressure during this downdraft, which looks like a classic buyer’s strike.

Wednesday’s gap through the 2015 high signals a failed breakout that could yield additional downside in coming weeks. Even so, the stock is now trying to stabilize at the .618 retracements of two rally waves, giving bulls a final opportunity to save the leaky ship. Their efforts should be watched closely by sidelined investors interested in owning shares because the payoff in coming years could be substantial.

The Bottom Line

Blackstone has failed a four-year breakout after a 31% five-day decline, but the company could greatly benefit from the current pandemic in coming years.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.