Och-Ziff Capital (NYSE:OZM)

MegaShort (99.95) Submitted: 3/12/2013 2:28:18 PM : Start Price: $8.85 OZM Score: -18.89

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%.

OZM'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.