T. Rowe Price Group, Inc. (TROW), Franklin Resources, Inc. (BEN), Eaton Vance Corp (EV) – Asset Managers: A Market Proxy and More

Page 1 of 2

Asset management companies basically run mutual funds and provide investment advisory services to high net-worth individuals and institutions.

They are an interesting sector to follow and might offer investors a more profitable way to play any expectant bull market.

The pro’s and con’s of asset managers

Asset management is a very lucrative business. Most revenues are generated based on the value of Assets Under Management (“AUM”). Though financial market fluctuations impact AUM levels, these companies are pretty consistent moneymakers. A majority earned substantial profits even through the 2008-2009 financial crisis.

T. Rowe Price Group, Inc.

AUM is the industry’s key indicator. Significant increases in AUM are mostly gained through market appreciation or acquisition of other, typically smaller, asset managers rather than inflows from new investors. The competition for investor assets is fierce. Various exchange traded funds, low-cost index funds, and the allure of hedge funds have all greatly reduced the appeal of the legacy mutual fund.

The leverage asset manager stocks have over the general market during a bull run might be of the most interest for investors. From the stock market bottom in 2009 to their high in 2013, the average share price for a sample of mutual fund providers has exploded about 3.5 times compared to an approximate 2.5 times rise in the S&P 500. At the same time, some of these firms paid dividends that yielded between 1% and 3%.

Buy the manager not the product

Investing in the manager seems preferable to buying their product when expecting a market rise. Some of the major publicly traded firms I follow are:

Franklin Resources, Inc. (NYSE:BEN), which operates as Franklin Templeton Investments, is a fairly large and very efficient asset manager with a roughly 25% cash earnings profit margin and average compensation/distribution costs of about 56% of revenues. The company announced recent quarterly revenues of $2.0 billion versus $1.8 billion in 2012 and net income of $573 million, compared to $503 million from the previous year.

Franklin Resources, Inc. (NYSE:BEN)’s AUM was $823.7 billion at March 31, 2013, up 5% during the quarter. The increase was primarily due to $24.5 billion in market appreciation and $18.3 billion of net new flows, mostly in taxable global fixed income products. A solid performer, assets increased 14% year over year, primarily due to market appreciation and roughly 3.6% of net new inflows.

T. Rowe Price Group, Inc. (NASDAQ:TROW) is one of the most efficient managers. It has around a 29% cash earnings profit margin and very low compensation/distribution costs, around 42% of revenues. The firm reported net sales of $816 million and net income of $242 million for its latest quarter. On a comparable basis, sales were $729 million and net income was $198 million in 2012.

Their AUM at March 31 totaled a record $617.4 billion. Net cash inflows during the quarter were a lackluster $3.3 billion or around 2% higher annualized. Lately T. Rowe Price Group, Inc. (NASDAQ:TROW) has specialized in target-date portfolios. These invest in multiple underlying funds that automatically adjust to a more conservative allocation as the client ages. Gaining in popularity, target-date funds attracted virtually all of the quarterly inflow.

Eaton Vance Corp (NYSE:EV) is a smaller asset manager with consolidated AUM around $260 billion. The company might be the most adaptable, however. Their innovative focus on current popular investment trends has helped assets grow at around a 9% annualized rate over the last couple of quarters. Floating rate income, commodity and currency based, and other alternative type funds were the main drivers of growth.

The company also reported recent quarterly earnings of $64 million, with a cash earnings margin around 18%, up from $53 million in the same quarter the year before. Revenue rose 9 percent to $332 million from $305 million, as investment and advisory fees rose 11% to $277 million.

Page 1 of 2

Dividend Stock Alert - Billionaire Robbins' Top Dividend Idea With 70% Upside Potential

Get Paid 3.5% Per Year While Waiting For The Stock Appreciate 70%

Larry Robbins' Glenview Capital Opportunity Fund returned 101.7% in 2013 and Robbins personally made $750 million. The same fund returned 25.3% in 2014. In this FREE REPORT we will share Robbins' top dividend idea that yields 3.5% and has been increasing its dividends for 39 consecutive years. Robbins thinks the stock has the potential to appreciate 70%.

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!