Why Och-Ziff Is Poised to Underperform

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, investment manager Och-Ziff Capital Management Group LLC (NYSE: OZM  ) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Och-Ziff and see what CAPS investors are saying about the stock right now.

Och-Ziff facts

Headquarters (founded)

New York (1994)

Market Cap

$1.4 billion

Industry

Asset management

Trailing-12-Month Revenue

$1.2 billion

Management

Chairman/CEO Daniel Och
CFO Joel Frank

Return on Equity (average, past 3 years)

22.2%

Cash / Debt

$162.5 million / $612.4 million

Dividend Yield

31.9%

Competitors

AllianceBernstein L.P.
Citigroup 
UBS Financial Services

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 26% of the 97 members who have rated Och-Ziff believe the stock will underperform the S&P 500 going forward.

Just yesterday, one of those Fools, All-Star MegaShort, explained why Och-Ziff looked overvalued:

When valuing asset managers, I take tangible book value (TBV) and add a percentage of assets under management (AUM).

The percent of AUM varies depending on the quality of the business (reflected in fees and growth). A great alternative asset manager might be worth 5% of AUM, a mediocre alternative might be worth 3%, a great mutual fund manager 2%, a mediocre mutual fund manager 1%.

[Och-Ziff's] TBV is -$250M and AUM is $34.6B. To justify the market cap, the percent of AUM needs to be 12.3%. The valuation appears quite unreasonable.

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