Why KKR Stock Rallied 10.5% in May

The private-equity giant continues to grow briskly.

Shares of KKR (KKR -1.51%) jumped 10.5% in May, according to data provided by S&P Global Market Intelligence. The private equity giant had a busy month, reporting its first-quarter results and securing several new strategic partnerships.

A busy month for KKR

KKR reported strong first-quarter results in early May. The private equity giant delivered 20%+ growth in its fee-related earnings, total operating earnings, and adjusted net income. It also grew its assets under management (AUM) by 13% to $578 million, raising an impressive $31 billion of new capital in the quarter.

KKR also formed several new strategic partnerships last month. For example, it signed a strategic joint venture with healthcare real estate investment trust (REIT) Healthcare Realty (HR 0.48%) to jointly own and invest in medical outpatient buildings. The REIT will contribute 12 existing properties worth $383 million. Healthcare Realty will receive $300 million and own a 20% stake in the joint venture.

KKR could potentially invest up to $600 million more into the joint venture in the future to pursue additional investments. The deal will supply the REIT with cash to repurchase stock while providing both companies with a growth platform.

Another notable deal saw KKR establish a strategic partnership with Hannon Armstrong Sustainable Infrastructure Capital (HASI -1.70%) to create CarbonCount Holdings. Each company contributed $1 billion to the company, which will invest in climate-positive projects. The transaction will help leverage Hannon Armstrong’s expertise in investing in sustainable infrastructure projects with KKR’s deep pool of investor capital.

KKR also joined forces with Capital Group on an exclusive strategic partnership to create public-private investment solutions. They aim to make hybrid public-private market investment solutions available to investors across several asset classes, geographies, and channels.

High-net-worth individuals and accredited investors currently don’t have many ways to access alternative investments. This partnership will help provide these retail investors with more opportunities to add alternatives to their portfolios.

Is KKR a buy after last month’s rally?

Shares of KKR have rallied sharply over the last year (up nearly 80%). However, they still trade at a relatively attractive valuation, even with that rally. The company currently sells for less than 21 times its forward price-to-earnings ratio (P/E). That’s a little cheaper than the S&P 500 (more than 21.5 times its forward P/E).

That’s still a decent price for a company growing as fast as KKR these days. The alternative-asset manager should continue growing briskly, driven partially by the rise in alternatives among retail investors, who could pour trillions of dollars into alternatives over the coming years.

That should give KKR more capital to invest, growing its fees and performance income. While KKR isn’t as cheap as it was a year ago, it could continue to generate strong returns for investors in the coming years.

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