BGC Partners: Major Player in InterDealer Broker and Commercial Real Estate

Keith Rosenbloom presented his in-depth investment thesis on BGC Partners (Nasdaq: BGCP) at Best Ideas 2016.

BGC Partners is a diversified broker with significant positioning in two oligopolies: inter-dealer brokerage (IDB) and commercial real estate (CRM). BGCP is a $4 billion asset light company with a 6.5% dividend yield, trading at a valuation that screens like it is a $2 billion market cap company. The company is underfollowed (it has only two analysts), and is semi-controversial in that the CEO is high-profile and there are perceived conflicts of interest. Keith likes and owns BGCP because (1) management is sharp; (2) the brokerage business has some large structural tailwinds; (3) management is focused on increasing shareholder value; (4) management and insiders own $2 billion (48% of the company); (5) the company trades at 10x earnings and carries a 6.5% dividend yield; (6) prospect of organically increasing the dividend (substantially so); (7) they take in an additional $640 million of Nasdaq value ($60 million each year); (8) interest rate hikes are a net positive for the brokerage business and the stock; (9) for those wanting to hedge out the CRE exposure: Jones Lang LaSalle (JLL) yields less than 1% and has similar growth characteristics to 50% of BGCP’s business; and (10) Keith believes the near term prospects of the business are solid. There are a number of near-term catalysts as well as some structural tailwinds.

About the instructor:

Keith Rosenbloom has over 20 years of direct investing experience, with a focus on applying traditional private equity value oriented perspectives to both special situations and structured investments. Keith co-founded and managed the CARE Capital Group of Hedge Funds from 2002 to 2010. Since then he has managed discretionary capital and invests opportunistically in public and private entities. Previously he served as the Portfolio manager of the CAR Fund and co-managed Comvest Venture Partners. He served as the Director of Merchant Banking for Commonwealth Associates from 1996 to 2001 where he specialized in making primary investments in public and private companies (approximately 80 transactions representing approximately $800mm). Keith became a Partner at Commonwealth Associates in 1994. Previously Keith worked with Prudential Capital and Merrill Lynch Venture Partners. He has invested in or managed investments in over 100 hedge funds and private equity funds. Keith currently sits on the board of PAWSAFE, LLC, a private pet health insurance distribution company. In addition, he serves on several charitable boards including UJA -Federation of New York, Hillel International (Board of Governors), Hatzalah (Israel’s private EMT service) and serves on the investment committee for Hillel International. He also serves on the investment committees of two family offices. He graduated cum laude from Yale University.

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