What Happened?
A number of stocks fell in the afternoon session after investors kept pricing in higher borrowing costs from the Federal Reserve’s recent rate hike and the lasting pressure that tighter policy puts on private-market dealmaking and exits. According to Morningstar, elevated policy rates create headwinds for private equity firms by lifting floating-rate interest expense and worsening exit bottlenecks. More expensive leverage can slow deal activity and make portfolio-company sales harder to complete at attractive prices, reducing distributions back to limited partners. That hangover from the Fed’s tightening move continues to weigh on publicly traded PE managers and related capital-markets names as the market reassesses how durable higher funding costs will be for leveraged deal flow.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Investment Banking & Brokerage company Piper Sandler (NYSE: PIPR) fell 3.3%. Is now the time to buy Piper Sandler? Access our full analysis report here, it’s free.
- Investment Banking & Brokerage company Houlihan Lokey (NYSE: HLI) fell 3.4%. Is now the time to buy Houlihan Lokey? Access our full analysis report here, it’s free.
- Asset Management company Blackstone (NYSE: BX) fell 2.6%. Is now the time to buy Blackstone? Access our full analysis report here, it’s free.
Zooming In On Houlihan Lokey (HLI)
Houlihan Lokey’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 11 months ago when the stock dropped 8.8% on the news that the company reported third-quarter 2025 results that surpassed Wall Street's forecasts for both revenue and earnings. The company delivered strong headline numbers, with revenue growing 14.7% year on year to $659.5 million and adjusted earnings per share of $1.84 beating consensus estimates by 9.3%. Despite these positive results, the stock's decline suggests investors may be focused on the company's future prospects. The outlook for the next twelve months indicates an expected full-year EPS growth of 5.4%, a figure that may have underwhelmed investors who had priced in higher expectations for the premium-valued stock. The market's negative reaction implies that the solid quarterly performance was not enough to outweigh concerns about a potential slowdown in future profit growth.
Houlihan Lokey is down 27.9% since the beginning of the year, and at $127.09 per share, it is trading 38.4% below its 52-week high of $206.19 from September 2025. Despite the year-to-date decline, investors who bought $1,000 worth of Houlihan Lokey’s shares 5 years ago would now be looking at an investment worth $1,333.
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