Why Carlyle Group Shares Sank

Is this meaningful, or just another movement?

Sean Williams
Sean Williams
Feb 21, 2013 at 4:01PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of The Carlyle Group (NASDAQ: CG), an investment firm that specializes in direct funding of management-led buyouts, as well as other types of investments, dipped as much as 13% following the release of its fourth-quarter results.

So what: For the quarter, total earnings fell 28% as Carlyle's private-equity segment was unable to match last year's asset returns. Total economic net income, or ENI, a measure of profitability that takes into account the market value of its assets held, fell to $182 million, or $0.47. Wall Street had been expecting Carlyle to report an ENI of $0.69. Instead, Carlyle focused on portfolio refinancings, which resulted in funds being returned to Carlyle investors, but left little profit for Carlyle.

Now what: These are simply the ebbs and flows you have to learn to live with if you're going to invest in companies that specialize in investments! Admittedly, Carlyle has a history of making very smart and strategic investments, and it's paying out a lofty dividend. But, on the flip side, Carlyle is intricately tied to the state of the economy, and its portfolio of investments will go noticeably south if the U.S.'s growth remains stagnant. Following a big rally since its IPO, it's a name I'd like to add to my Watchlist, but it's a company I'd suggest holding off on unless there's a sizable pullback.

Craving more input? Start by adding Carlyle Group to your free and personalized Watchlist so you can keep up on the latest news with the company.