Forty years of being in the business, the Janus Capital Group (NYSE:JNS) continues to establish its global investment excellence in offering unique solutions to its clients all over the world. The asset management holding company currently owns three independent investment firms, namely Janus, Perkins and INTECH, and holds over $160 billion in assets under management. Each of its three investment firms demonstrates focused investment expertise, as can be seen in the broad range of approaches and solutions that they provide in building shareholder values of their clients. JNS is the typical non-followed or undercovered stock that Warren Trades blog alters when to buy or sell to its readers.
I like the fact that JNS reported an average revenue growth of 5.2% over the last five years despite a very challenging global economic environment. The strength of Janus Capital Group lies in its research platform. The company's fixed income team offers portfolios with established track record through the expertise of the company in individual security selection within corporate credits. Investing in JNS concentrates on the generation of outstanding risk-adjusted performance. The investment specialists of this holdings group always aim to deliver the highest level of capital preservation for its clients through a more holistic view of the market. As they combine quantitative rigidity with qualitative analysis, the investment specialists of Janus Capital Group are able to obtain an absolute perspective of the financial health, growth prospects and valuation of its clients.
The recent partnership with giant Japanese insurance company Dai-Ichi propped up the competitive advantage of Janus. Dai-Ichi Life Insurance Company recently took a 20 % stake in JNS and acquired a 15-20 % equity stake in the firm through open market transactions. On top of that, the Japanese life insurance firm also made an investment of $2 billion into the funds of the Janus Capital Group. A significant portion was of those funds were allocated to fixed income products. The strategic alliance did not only bolster up the fixed income funds of the holdings group but also generated an enormous heterogeneity in the firm's product line, representing a significant leap in the expansion of the business as it forays into the Asia-Pacific region.
Janus has a strong balance sheet from the capital restructuring made in 2009. The company had cash and cash equivalents of $304 million as of June 30, 2012. However, in the first half of 2012, net outflows increased to $6.4 billion from $5.8 billion in the previous year, driven by extreme market volatility and a rise in outflows in mathematical equity assets. Janus Capital is implementing a diversification strategy with new product innovation to improve investment performance. In addition, Janus Capital continues to improve its operating leverage by enhancing its organic growth in addition to focusing on reducing expenses. The company achieved its goal of reducing more than 50% of operating expenses to in 2009 and 2010 while in 2011 expenses continued to decline and stood at $670.1 million, down 8.7% from the prior year. Moreover, in the first half of 2012, the company recorded a decline of 12.9% in operating expenses. This strategy will create an even stronger balance sheet and keep the reported growth in earnings for the foreseeable future.
Janus competitors include Invesco (NYSE:IVZ), BlackRock (NYSE:BLK), Fortress Investment Group (NYSE:FIG), Oaktree Capital (NYSE:OAK), Eaton Vance (NYSE:EV) and Och-Ziff Capital (NYSE:OZM). Janus trades at a P/B multiple of 1.19x, lower than that of its main competitors. It also trades at a very low P/S multiple of 1.60x, almost half the multiple of the rest of its competitors. For example, Och-Ziff trades at a P/S of 6.69x and BlackRock at a P/S of 3.56x. In terms of valuation, Janus looks cheap compared to its peer group. The valuation on a price-to-book basis looks attractive, given a trailing 12-month ROE of 8.4%, which is at a discount of 8.7% to the industry average.
In conclusion, I think that JNS offers earnings stability, a strong balance sheet, a compelling technical picture and growing institutional sponsorship. The stock is cheap and could be ready to rise when the market starts recognizing that the stock should be trading at a P/B or P/S multiples more close to its peers. In fact, Zacks Research has a six month price target of $9.75. Combined with an annual dividend of $0.24 per share, this target price implies a total return of about 6.8% over that period.