Asset managers and private equity firms may not come to mind when you think of the hottest industries this year, but this week they notched higher again in the Zacks Industry Rank into the top 6%. And since these masters of investing are a group I really enjoy researching and investing in, I had a hard time choosing which #1 Rank company to write about.
I decided to go with the firm that started it all: Kohlberg Kravis Roberts & Co., now simply called KKR (NYSE:KKR-Free Report). As the company says, "The story begins on May 1, 1976, when KKR opened its doors as a firm specializing in management buyouts, a unique approach to investing that pioneered an entire industry: private equity."
KKR provides a range of asset management services to its investors and delivers capital markets services to its firm, its portfolio companies and its clients. The company operates private equity funds that take either controlling or strategic minority ownership positions for long-term appreciation.
They are also very active in the debt and credit markets, investing in leveraged loans, high-yield bonds and less liquid credit products. And, on behalf of portfolio companies, KKR arranges equity and debt financing and offers capital market advice.
With a market cap of $7 billion, KKR grew its assets under management (AUM) to $90.2 billion as of September 30, 2013, up from $83.5 billion in the June quarter.
Acacia Research Corporation (Nasdaq:ACTG-Free Report) develops, acquires, and licenses patented technologies. It assists patent owners with the prosecution and development of their patent portfolios, protection of their patented inventions from unauthorized use, generation of licensing revenue from users of their patented technologies and enforcement against unauthorized users of their patented technologies.
The company has been a Zacks #5 Rank since mid-October and I thought it would be good to revisit the reasons why. Here's what I wrote on October 30...
The company seemed over the past few years to be building an impressive portfolio of patents to license. In fact, I traded the stock in 2012 after I saw George Soros was a shareholder. But underneath the surface is an unpredictable revenue stream built on lawsuits and it's no wonder the company doesn't give guidance.
Since a quarterly revenue peak of $99 million in early 2012, the company and the stock have been sliding. And dozens of weeks in the past two years where the stock was either a Zacks #4 Rank (Sell) or #5 Rank (Strong Sell) have kept our followers out of the name.
BB&T to Acquire 21 Citibank Branches
In order to enhance its presence in Texas, BB&T Corporation (NYSE:BBT-Free Report) announced a deal to acquire 21 branches from Citibank, the consumer banking division of Citigroup Inc. (NYSE:C-Free Report). The company will pay approximately $36 million for the branches, which is premium to book value of 4.25% of core deposits (as of Sep 30, 2013).
BB&T will acquire all the Citibank branches located in Austin, Bryan-College Station and San Antonio markets. Further, the company will assume $1.2 billion in deposits and $134 million in loans. The transaction, still subject to regulatory approvals, is expected to close by the second quarter of 2014.
Following the completion of the deal, BB&T will have 81 branches in Texas, along with $2.8 billion of deposits and $2.1 billion of loans. While the company already has a presence in Austin and San Antonio, it will be entering the Bryan-College Station market for the first time.
BB&T entered the Texas banking region with the acquisition of 22 branches of Colonial Bank in 2009. In a span of four years, the company witnessed widespread growth in the region. In Nov 2012, the company announced plans to expand further in the Texas region through 30 branch openings, which have now been accomplished.
Apart from banking branches, BB&T has other operations in the Texas region. The company's subsidiaries, Regional Acceptance Corporation, McGriff, Seibels & Williams, Inc, BB&T Insurance Services, BB&T Capital Markets, BB&T Investment Services and Grandbridge Real Estate Capital LLC are well-established names in the state.
BB&T's expansion strategy is going to further increase its expenses. In the first nine months of 2013, the company's operating expenses were $4.3 billion, up nearly 1% from the prior-year period.
On the bright side, BB&T's top line will be positively impacted by the acquisition. Further, loans and deposit balances will witness substantial improvements. All these should boost the company's financial performance, going forward.
At present, BB&T carries a Zacks Rank #3 (Hold). Better-ranked banking stocks include Fifth Third Bancorp (Nasdaq:FITB-Free Report), which carries a Zacks Rank #2 (Buy).
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