Major Financial Venture for 2025: A Snapshot of Patria Investments Progress

Hey there! Let's dive into an exciting investment opportunity that's still smoking hot – Patria Investments (NASDAQ: PAX)!

I penned an article earlier this year titled "My Top Stock Pick for 2025: Patria Investments," revealing that this alternative asset manager had become my significant investment.

I put a large chunk of my money into Patria because I reckon it's an excellent business, incredibly undervalued.

Fast forward six months, and it's already rewarded me with a whooping 27% return! With that performance, you might be wondering if it's time to cash out or if there's more to come.

Let's take a look and see what's happening with this gem!

A Ruby Among Investments

Patria is similar to big hitters in the alternative asset world like Blackstone (BX), KKR (KKR), and Brookfield (BAM). They manage investments in private equity, infrastructure, real estate, and credit in exchange for fees.

When you're successful in growing your assets under management while delivering stellar performance, this business can be incredibly lucrative. Blackstone serves as a great example, with shareholders accumulating a small fortune as the firm expanded its assets under management and fee income.

We believe Patria has the same potential!

It's the leading alternative asset manager in Latin America and is enjoying rapid growth in assets under management, having more than tripled since its IPO in 2021.

What fuels that growth?

Latin America's Growing Popularity: As geopolitical crises mount, investors are becoming skittish about placing their money in riskier regions like Europe and Asia. Consequently, they're turning to Latin America. The region offers diversification benefits, untapped potential, low valuations, high yields, and even rapid economic growth. Plus, the growing trend of nearshoring is also supporting growth.
Patria's Expertise: Navigating Latin America's complex markets can be a challenge for foreign investors. That's where Patria steps in. With decades of experience, a robust reputation, and strong track record, they're the go-to choice for major institutional investors targeting Latin America. Moreover, they're also considering acquisitions of smaller local asset managers to bolster their growth and offer a broader range of strategies to clients.

These factors give Patria the confidence to project 15% annual growth in fee-related earnings over the coming years, potentially translating into near 20% annual total returns even without multiple expansion.

Patria Investments

But wait, there's more! Patria'sBalance sheet is rock-solid with a low debt-to-FRE of less than 1x, and it's even returning cash to shareholders through stock buybacks!

Exceptional Results and Even More Upside

Ever since going public, Patria has consistently delivered exceptional results. Though the market remained blasé about these results until recently, the recent surge in interest is well-deserved.

Peer Group

In Q1 alone, Patria raised an impressive $3.2 billion – a sign that growth is accelerating and the company is likely to exceed its annual fundraising target of $6 billion. That's not all; their earnings have increased at a brisk pace too, with a 16% year-over-year growth in Q1.

These strong performances led to a reaffirmed full-year guidance of $1.25 - $1.5 in fee-related earnings per share. Knowing Patria, we're betting on them reaching the upper-end of that range, which means the stock is currently trading at just 9.3x FRE even after its recent rally.

For comparison, other alternative asset managers typically trade in the range of 25 – 35x FRE, and Patria's current valuation is significantly lower. This discount would make sense if PAX had worse growth prospects or a riskier business, but considering its rapid growth, we think the market is missing the boat here!

In fact, the management expressed increased confidence in reaching their multi-year guidance following the recent acceleration in fundraising. They also pointed out that the trade war is benefiting them as it encourages investors to diversify, channeling more capital into Latin America, particularly since most tensions revolve around the U.S. and China.

On the risk side, it's fair to note that emerging markets typically trade at a discount. However, Patria's strong balance sheet, earnings predominantly generated in hard currencies from long-term partnerships with major global institutional investors, diversification across countries and asset classes, and predominantly defensive investments offset much of that risk.

Final Thoughts: Still a Profitable Bet

P/FRE

While the shares have already returned nearly 30%, this is justified given the attractive valuation and strong recent results.

Even now, it still only trades at 9.3x FRE, which seems too low for a company of this caliber in our view.

The recent price jump is just the tip of the iceberg when considering how undervalued the stock was in the past, even as the company delivered plenty of value:

9.3

Our bet is that Patria Investments will remain in our portfolio! We're optimistic about further upside ahead.

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Investing in Patria Investments (NASDAQ: PAX) is not only a lucrative business opportunity but also an excellent finance move, as it offers potential returns in the real estate, private equity, infrastructure, and credit sectors, similar to established players like Blackstone (BX), KKR (KKR), and Brookfield (BAM).
The growth of Patria is driven by both Latin America's growing popularity among investors and its own expertise in navigating complex markets, making it a preferred choice for major institutional investors. This, combined with its solid balance sheet and potential for increased fee-related earnings, makes it a promising investment with the potential for near 20% annual total returns.