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(B)(N) BAH Booz Allen Hamilton Incorporated

June 10, 2013

Deal Book. Booz Allen Hamilton Incorporated is a corporate strategy and consulting firm in change management and technology and does 99% of its business with the U.S. government and its manifold departments. Last year’s sales were just short of $6 billion but with 24,500 employees that’s only about $250,000 per head, so to speak, and falls far short of many-a-Wall Street trust and legal adviser, let alone an “investment banker” like The Carlyle Group.

Spotlight: Cyber Solutions

Courtesy: Booz Allen Hamilton Incorporated

Booz Allen was founded in 1914 and is a bespoke firm for government contracts, but was acquired in 2008 and then taken public at $17 per share in 2010 by The Carlyle Group which has recouped its investment plus 100% and still owns 67% of the firm (Forbes, June 10, 2013, The Carlyle Group Has Made $2 Billion Off Of Booz Allen).

The Carlyle Group was founded in 1987 with a capital of about $5 million, and is a bigger story for investors than Booz Allen, but skittish investors, anxious of the future, in the small float sold off about 1.3 million shares today, about three to four times the average daily volume, but knocked less than 50¢ off the share price (Forbes, June 9, 2013, NSA Contractor Booz Allen Hamilton Rushes To Distance Itself From Staffer Who Leaked Top Secret Docs).

File:Carlyle Group historical logo.png

Courtesy: The Carlyle Group

The stock pays a common dividend of $0.40 per share per quarter or $55 million per year for an encouraging yield of 2.2%.

Our estimate of the current downside due to price volatility is minus ($2.25) per share so that any price between the current $18 and $16 to $20 should not surprise us. It’s trading above the Risk Price (SF) of $16 and rising, and could be included in the Perpetual Bond™ for that reason alone, and without further “deep thoughts” about who owns what and why (Red Line Stock Price (SP) above the Black Line Risk Price (SF), and for no other reason).

After all, we’re just investors and, basically, bystanders & collateral damage, because The Carlyle Group is running a tight ship as Booz Allen’s debt increases and the shareholders equity vanishes as a “capital surplus”.

Exhibit 1: (B)(N) BAH Booz Allen Hamilton Incorporated – Risk Price Chart

(B)(N) BAH Booz Allen Hamilton Incorporated

(B)(N) BAH Booz Allen Hamilton Incorporated

Booz Allen Hamilton, a strategy and technology consulting firm, is a provider of management and technology consulting services to the U.S. government in the defense, intelligence and civil markets.

(Please Click on the Chart to make it larger if required.)

From the Company: Booz Allen Hamilton Holding Corporation provides management and technology consulting services in the United States. Its services enable clients to address various challenges, such as combating global terrorism, improving cyber capabilities, transforming the healthcare system, improving efficiency and managing change within the government, and protecting the environment. The company offers services in the areas of strategy and change management; organization efficiency and effectiveness; human capital, learning, and communications; cloud, decision, and mission analytics; cyber technology; strategic technology and innovation; systems development; enterprise integration; engineering; and acquisition, program management, and logistics. It primarily serves the United States government and its agencies in the defense, intelligence, and civil markets. Booz Allen Hamilton Holding Corporation was founded in 1914, has 24,500 employees, and is headquartered in McLean, Virginia.

The Price of Risk

The calculated Risk Price (SF) is a provably effective estimate of the “price of risk” which is “the least stock price at which the company is likeable” (Goetze 2009) and “likeability” is determined by the demonstrated factors of “risk aversion” – we want to keep our money and obtain a hopeful return above the rate of inflation – and the properties of portfolios of such stocks. Stock prices that are less than the price of risk can be said to be “bargain prices” but with the risk attached that the company might never get a higher price other than that due to ambient volatility or “surprise”; on the other hand, investors who are willing to pay the “full price” above the price of risk, and buy and hold the stock at those prices, must also be confident, and have reason to believe, that the company will produce those values, absent new information.

Please see our Posts, The Price of Risk, August 2012 and The Nash Equilibrium & Its Stock Price, October 2012, for more information on the theory.

To see what else “risk averse” investing can do for us, please see our recent Posts, The Wall Street Put, April 2013, and earlier Posts such as The Dow Transports, March 2013, or The Risk Adjusted Dow, March 2013, or The Canada Pension Bond, February 2013, and for a more colorful description of investment risk and the application of the “price of risk” to mergers & acquisitions, please see our Post, Bystanders & Collateral Damage, April 2013.


We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™“
Alpha-smart with 100% Capital Safety and 100% Liquidity”
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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