These 3 Top Financial Stocks Are Down As Much As 43.5% on Private Credit Fears. Here's Why I'm Buying Them Like There's No Tomorrow.

Brookfield (BN +1.13%), Blackstone (BX +2.93%), and KKR (KKR +2.71%) are three of the biggest alternative asset managers in the world. Brookfield and Blackstone have over $1 trillion in assets under management (AUM), while KKR ended last year with $744 billion in AUM. They invest in private equity, real estate, infrastructure, and private credit.

The high-profile bankruptcies of private credit borrowers First Brands and Tricolor late last year caused issues for private credit manager Blue Owl and raised concerns that a wave of defaults could hit the private credit sector. That has weighed on the share prices of Brookfield, Blackstone, and KKR, which have invested heavily in private credit. Both Blackstone and KKR are down about 43.5% from their 52-week highs, while Brookfield shares are off about 22%. I think the sell-off is a buying opportunity, which is why I’ve been loading up on these top financial stocks.

Image source: Getty Images.

What is private credit?

Banks have pulled back on lending over the years due to industry consolidation, increased regulation, and higher capital requirements. That has opened the door for non-bank financial companies to fill the gap by lending directly to companies. These private loans tend to be riskier, which is why banks aren’t originating them. Default rates of private credit funds hit a record 9.2% last year, up from a record 8.1% in 2024. However, they have higher interest rates than other credit investments, compensating lenders for their higher risk profiles.

Several alternative investment managers have raised funds to grow their private credit portfolios. The industry currently has about $2 trillion in private credit AUM. That’s double the level from 2020. Forecasters expect the private credit market to double again by 2030 to over $4 trillion in AUM.

Buying more of the best

The private credit situation could worsen, affecting Brookfield, KKR, and Blackstone. It has already had some impact on Blackstone, which manages a private credit fund open to individual investors (Blackstone Private Credit Fund or BCRED). Worried investors pulled $3.7 billion of capital out of the fund during the first quarter ($1.7 billion in net withdrawals after $2 billion in new commitments).

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NYSE: BX

Blackstone

Today’s Change

(2.93%) $3.14

Current Price

$110.26

Key Data Points

Market Cap

$131B

Day’s Range

$108.31 - $111.47

52wk Range

$101.73 - $190.09

Volume

183K

Avg Vol

6.8M

Gross Margin

99.27%

Dividend Yield

3.90%

However, Blackstone has an exceptional track record of investing in private credit. The investment firm has delivered a 10% net annual return since it started investing in non-investment-grade private credit 20 years ago with minimal losses. That’s double the return of the leveraged loan market. Blackstone’s strong track record is why it now manages $520 billion in corporate and real estate credit assets, a 15% increase over the past year, even as private credit concerns grew. Blackstone noted that its portfolio is in excellent shape, with its borrowers delivering high single-digit earnings growth on average, enhancing their ability to repay their loans. That drives my high conviction that the sell-off in Blackstone’s stock is a buying opportunity.

Brookfield also has an excellent record of investing in credit. The bedrock of the company’s credit platform is Oaktree. Brookfield bought a majority stake in the leading credit investment manager in 2019 and acquired the remaining stake in Oaktree last year. At the time of its initial investment, Brookfield CEO Bruce Flatt called Oaktree “one of the finest credit platforms in the world.” Brookfield has leveraged Oaktree’s credit expertise to build a leading platform by partnering with several other leading credit managers. It ended last year with $363 billion in credit assets under management. The company sees the continued expansion of its private credit platform as one of the many catalysts driving 25% annualized earnings per share growth over the next five years.

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NYSE: BN

Brookfield Corporation

Today’s Change

(1.13%) $0.44

Current Price

$39.51

Key Data Points

Market Cap

$96B

Day’s Range

$39.50 - $40.06

52wk Range

$29.07 - $49.56

Volume

52K

Avg Vol

5.5M

Gross Margin

26.37%

Dividend Yield

0.46%

KKR is in the early stages of building its private credit business. It has $41 billion of direct lending assets – including within its public and private BDCs – (less than 5% of its AUM) and another $102 billion of private credit assets. Its share price has gotten hammered despite its low exposure to private credit. KKR’s private credit business is a major long-term growth driver for the alternative asset manager.

Capitalizing on the concerns

Investors are selling off anything related to the private credit market on concerns that more of these loans will sour. While it’s likely that we’ll see more defaults in the sector, I’m highly confident that Blackstone, Brookfield, and KKR won’t experience meaningful credit issues in their portfolios. They’re very disciplined investors with exceptional long-term track records. That’s why I’m taking advantage of the sell-off in their stocks to load up on more shares.