The market has made a nice rebound over the past few months, and one question is on every investor's lips: Can it continue?
To get an answer, it might not be a bad idea to look at what the private equity firms are planning. Remember when The Blackstone Group (NYSE: BX) decided to cash out with an IPO and it marked the exact top of the private equity boom? Take a look at how that stock has performed since then.
Well, now The Financial Times reports that "Kohlberg Kravis Roberts, the world's biggest buy-out group, is preparing up to six companies for initial public offerings worth billions of dollars, including Toys 'R Us, as it sells some of its most valuable groups back to the stock market."
Toys 'R Us, First Data Corp, Dollar General, TDC, and HCA are among the companies KKR is reportedly looking to take public.
Maybe they're great companies, but just remember: Private equity firms get rich by buying low and selling high -- and if they're celebrating the rebound and planning IPOs, that might well be a sign that the market's rally is out of steam. If Toys 'R Us and First Data were going to continue to rise in value, why would they be making plans to take them public now?
KKR has been sitting on its portfolio companies for years, waiting for the right time to cash out. If KKR thinks it's time to cash out, it probably isn't a good time to be buying.
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