My Foolish colleague Morgan Housel definitely got one thing right in his article yesterday: Blackstone
Now, an internal memo indicates that the company may be getting ready to sell -- through IPO and outright sale -- up to 13 of its portfolio companies. Logically, Morgan asked: "When smart people are selling, should you be buying?"
And while I think the selling spree could be reason for pause, I hardly think this spells pending market destruction.
Executing a business model
Warren Buffett is renowned for having a decades-long view of his investments at Berkshire Hathaway
Not so with private equity. Whether we're talking about Blackstone, KKR, or the private equity divisions at Goldman Sachs
The past couple of years have put private equity firms face to face with some of the most unaccommodating capital markets in recent memory. Now that financial markets are starting to open back up, it makes perfect sense that these shops would finally make some portfolio exits.
Does private equity really call a top like this?
Blackstone may be planning exits, but it has also been making noise on the purchase front. Last week, the company agreed to buy Anheuser-Busch InBev's theme park business for $2.7 billion. And I expect that in short order, we'll be hearing even more from the buyout front, particularly as private equity investors start salivating again, and buyout companies are able to start raising new funds.
But is this what a private equity top looks like? Sure, Blackstone may have called the previous top by selling itself, but there wasn't a whole heck of a lot of selling going on at that time. Back when the market was topping, private equity firms were tripping over themselves to raise ever-larger funds and put together mind-boggling deals.
When private equity funds can again raise multibillion-dollar sums with nothing more than a wink and a smile, then it's time to worry.
And for the rest of us?
Even though I'm not fretting about Blackstone's "tell," I have made it known that the market's valuation concerns me. I'm hesitant to call this a top, but I'm likewise not all that bullish on how much further it can run.
So what should we individual investors do? I think we can take a page right out of Blackstone's book, and selectively buy and sell. Blackstone has no doubt chosen the companies it plans to sell for specific reasons, and we can do the same thing.
Concerned that a stock has run up too much in the recovery, or that its business isn't as solid as you once thought? Wave bye-bye. At the same time, though, there are many high-quality companies still selling at attractive prices. For instance, Motley Fool Inside Value picks UnitedHealth Group
Still cynical about the financial services industry? Join Jordan DiPietro for John Thain's walk of shame.
Berkshire Hathaway and UnitedHealth Group are Motley Fool Stock Advisor picks. Berkshire Hathaway, General Dynamics, and UnitedHealth Group are Motley Fool Inside Value recommendations. The Fool owns shares of Berkshire Hathaway and UnitedHealth Group. Try any of our Foolish newsletters today, free for 30 days.
Fool contributor Matt Koppenheffer owns shares of Berkshire Hathaway and Blackstone, but does not own shares of any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool. The Fool's disclosure policy eats pizza for breakfast.