Millions of investors use mutual funds for retirement or to pay for college tuition. What many of them don’t realize is that the mutual fund companies themselves are publicly traded companies that can be invested in too.
Some of them make compelling investments. Despite the lower management fees and the presence of alternative lower-cost options like ETFs, mutual fund money management remains a multi-trillion dollar industry. As long as people keep saving, there’s money to be made. Several mutual fund companies that currently make enticing investment opportunities are names that are familiar to most.
T. Rowe Price Group, Inc. (NASDAQ:TROW)
T. Rowe Price Group, Inc. (NASDAQ:TROW) managed roughly $90 billion in its family of mutual funds. The company has one of the longest histories in the investment industry, having been founded in 1937.
Price has seen its managed assets under threat from ETFs, but it hopes to counter that by launching its own line of ETFs. It remains to be seen how effective this strategy will be, but attempting to establish a presence in this growing space seems like a good idea.
From a fundamental standpoint, its P/E of 18 and price-to-book ratio of 4.8 are a little on the rich side. But, analysts have been raising earnings and revenue expectations, and operating margins continue to be among the highest in the industry.
If you like stocks with a solid growing dividend, you’ll love Price. This company has been growing its dividend for decades and now sports a yield of almost 2%.
Janus Capital Group Inc (NYSE:JNS)
Janus Capital Group Inc (NYSE:JNS) is primarily an equity-based mutual fund company, and as such has experienced some difficulty in growing assets under management in the past decade. Currently, the company manages around $160 billion.
This company doesn’t have the growth potential of some of the other stocks on this list — the forecast five-year growth rate is just 10% — but its value characteristics alone make it worth a look. It maintains a price-to-book ratio of just 1.1, and its P/E ratio of 11 is compelling. If the stock market continues its bull run and the mountain of cash on the sidelines begins moving back into equities, this entry point could end up looking downright cheap. In the meantime, shareholders can enjoy a 3.2% dividend yield while they wait for growth to develop.
Franklin Resources, Inc. (NYSE:BEN)
Franklin Resources manages just under $1 trillion through the Franklin Templeton group of funds. The company specializes in fixed income offerings and its earnings and stock price have done very well lately. In the last 12 months, the stock price has risen from around $100 to $160.
Analysts have also been raising their earnings estimates in the past couple of months. They’re now projecting current year earnings of about $10.42 per share – up from estimates of $9.98 just two months ago. Add in projected five year growth of about 15% and a reasonable P/E ratio of 14 and you’ve got a stock that still has some room to run.
AllianceBernstein Holding LP (NYSE:AB)
AllianceBernstein Holding manages nearly a half trillion dollars. On the surface, this stock looks attractive based on its yield alone. Currently, the stock is yielding roughly 6% which puts it well above the average of its investment management group peers. The trouble? The quarterly dividend payout is erratic. The quarterly payout has been bouncing up and down for much of the last decade. The current yield may be 6% but there’s certainly no guarantee that you’re going to see that going forward.
The stock price has doubled in the last 12 months leaving some fearing that the stock is overbought, but current P/E and price-to-book ratios remain reasonable; there could be more upward potential yet.
Invesco Ltd. (NYSE:IVZ)
Invesco manages approximately $750 billion in assets through its family of mutual funds, as well as through its other retail, institutional and private banking channels. Earnings estimates are on the rise for this company. Five-year growth estimates sit at a solid 15% and its price to earnings ratio of just under 14 measures favorably to its peers. Its 2.7% yield is nice as well, as the company just bumped up the payout again in the second quarter.
Conclusion
Investment management companies can look very similar to other financials in that they can provide slow steady growth coupled with a juicy yield. These companies will benefit from the aging of America and the shifts in strategy to get people to save more for retirement and other savings goals. These companies should see their assets under management continue to grow and that growth will continue to pad the bottom line.
David Dierking has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article Mutual Fund Companies Make Good Investments Too originally appeared on Fool.com and is written by David Dierking.
David is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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