UBS’ Bottom Quant Stocks In AI, IT, Healthcare & Others: 29 Stocks In All Sectors

4. Franklin Resources, Inc. (NYSE:BEN)

Number of Hedge Fund Investors In Q2 2024: 27

Sector: Financials

Franklin Resources, Inc. (NYSE:BEN) is one of the biggest investment management companies in the world. The firm has a vast portfolio of mutual funds and its sizable resources in the form of $4 billion in cash and $10.7 billion in investments provide it with sizable heft. Franklin Resources, Inc. (NYSE:BEN)’s business, which sees it derive 79% of its revenue from investment management fees also makes it reliant on capital markets health. So, while the flagship S&P index’s 25.94% year-to-date gains suggest that investment managers like Franklin Resources, Inc. (NYSE:BEN) should see greater returns too, the reality is different, as the stock is down 27.31%. This has been primarily driven by higher expenses, as the firm’s operating expenses have jumped by 11% during the nine months ending in June while its revenue has grown by 6.8%. The expenses are driven by Franklin Resources, Inc. (NYSE:BEN) efforts to retain investor attention in an era of high interest rates. The firm’s fortune hasn’t been helped by troubles at its fixed-income business either which have forced it to take a $623 million charge.  Consequently, lower rates and streamlined operations might help Franklin Resources, Inc. (NYSE:BEN), moving forward.

During the Q4 2024 earnings call, Franklin Resources, Inc. (NYSE:BEN)’s management shared how it’s changing things in the fixed-income business:

“Since the beginning of the investigations, Western Asset’s trading policies have been reviewed by third-party experts.

Per this review, despite being aligned with industry standards, Western has further enhanced its trading policies and practices. In addition, Franklin Resources is working with Western’s management team to explore ways to assist Western Asset, including adjustments to economic arrangements, operational and revenue synergies. This may entail changes that are similar to what we have successfully implemented with our other public market specialist investment managers, while maintaining investment process independence. And I’m sure that you understand with an ongoing investigation, we are unable to provide any further information or address questions on this matter at this time. Aside from Western Assets, we think it’s important to highlight the breadth of our fixed income investment management expertise, including Franklin Templeton fixed income, Brandywine Global and Templeton Global Macro, which have non-correlated investment philosophies.”