Why Och-Ziff Is Poised to Underperform

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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 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-Zifffacts

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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The article Why Och-Ziff Is Poised to Underperform originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool owns shares of Citigroup Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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