Ares Management Corporation (ARES) has experienced a significant stock price decline since my previous "Buy" recommendation in October, falling approximately 14.5%. This downturn primarily followed its latest earnings report.
Despite this recent dip, Ares Management's fundamental strengths remain robust. The company successfully achieved record-breaking fundraising and its Assets Under Management (AUM) have now exceeded an impressive $600 billion. Although Q4 2023 saw a slight miss on both earnings per share (EPS) and revenue estimates, the company showcased substantial year-over-year growth. Furthermore, Ares demonstrated its confidence in future performance by increasing its dividend by 20%, bringing its yield close to 4%. This growth is further bolstered by a 69% surge in wealth management AUM to $66 billion and a more than doubling of real assets, positioning Ares for continued expansion in both retail and infrastructure sectors. With a substantial $156 billion in deployable capital and a strategic focus on generating stable management fees, Ares is well-prepared for a performance fee realization cycle anticipated in 2026, setting the stage for long-term outperformance.
Ares Management's current market valuation, following the post-earnings sell-off, appears to undervalue its strong growth prospects and solid financial position. The increased dividend and strategic expansion into high-growth areas like wealth management and real assets underscore the company's commitment to delivering shareholder value. This presents a golden opportunity for investors to acquire shares in a leading asset manager with significant upside potential as it navigates towards future growth and profitability.