Last week, Janus Capital (NYSE:JNS) released earnings that were slightly better than expected on the bottom line ($0.19 a share earnings beat by $0.01), but missed by a few percent on revenue (posting $231 million and missing by just $ 4 million). Assets under management continued to grow, coming in at $177.7 billion, versus $174.1 billion in 1Q 2014 and $160.6 billion in 2Q 2013.
Since we first covered Janus back in August, shares are up over 30%. As we mentioned in August, "We think the current move out of fixed income has been anticipatory of the impending rise in rates. The rise in interest rates will be an eventual virtuous circle, where people pull out of fixed income to avoid the fall in fixed income securities' prices, flooding into equity funds, driving equity prices higher. The cyclical re-risking will then lead to further floods into equity funds."
Janus is still trading at a slight discount to our $13.30 price target. We believe it's worth holding out for a bit more upside, as some institutions are likely still holding out until rates actually move higher. If there was one disappointment with 2Q, it was that we didn't see as robust a flight to equity funds as we would have expected. However, given the Fed's remarks earlier this month (with rates likely heading higher in the first half of 2015), we expect 3Q to be quite positive. Remember, the key to Janus is that it has more exposure to equity funds than its peers.
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