Deep | $OWL: Turning the Corner?
In today’s increasingly reflexive markets, we should be thankful to the media.
Sentiment-driven volatility continues to generate +EV entry points for the opportunistic investor – or anyone with a modicum of independent thinking, analytical drive and an investment horizon extending beyond two quarters.
Blue Owl has been the press’ pet piñata all year long. While there is rarely smoke without fire, the accompanying price action – both on an absolute basis and relative to comps – has been reflective of a patient in terminal decline.
Our audience is no stranger to separating noise from fundamentals. Even so, the following visual we put together on OWL may surprise you:
Redemption requests represent only ~3% of Blue Owl’s total fee-paying AUM.
Meanwhile, $30B of existing AUM – or roughly 5x total redemption requests – is expected to become fee-paying within the next 24 months as that capital gets deployed. This ignores new subscriptions into OCIC + OTIC and broader ongoing fundraising efforts.
Low Bar
Low is a suitable anagram for Owl here.
As we like to hammer, investing is a game of price vs. expectations. Case in point: as we are writing this, SK Hynix is getting punished for posting a below consensus Q2 EBIT of “only” +557% yoy (!)
The bet on Blue Owl is simple. It requires believing that:
OWL has valid standalone franchises outside of credit
The credit business itself should be valued on a going concern basis
While we did take a toehold position in OWL earlier this year, we were wary at the time of stepping in front of negative momentum too soon.
We now feel more comfortable sizing up. We will discuss why, alongside our valuation expectations for the stock in the short to medium-term.