Citi's William Katz suggests a fund manager pair trade of long T. Rowe Price (TROW -0.5%) against a short in Janus Capital (JNS -1.8%).
He rates TROW just a Neutral, but boosted his price target to $90 following yesterday's Q1 results. Janus is rated "Sell" as Katz sees "substantial downside risk."
The catalysts for betting on T. Rowe Price: It's a more favorable equity and fixed income play, it will enjoy accelerating operating trends for its flagship platforms, and it has faster organic growth, higher margins, better strategic positioning, and better capital management flexibility ... all for a lower valuation.
"Reading the mandate tea leaves - Post Q1 call (transcript), JNS management noted they are not seeing a pickup in active U.S. equity mandates among institutional clients. By contrast, TROW indicated pipeline for institutional remains steady. Given TROW has S/C and M/C capacity constraints, we can only infer solid demand for L/C mandates. Such dynamics reinforce our concern that despite some easing in redemption pressures of late for JNS in Q1, JNS remains a share donor story.
A check of some mutual fund managers after TIAA-CREF agrees to buy Nuveen for $6.5B find Janus (JNS +2.9%), Invesco (IVZ +1.2%), Affiliated Managers (AMG +1.4%), and Federated Investors all posting gains. Acquisitions in this industry don't happen too often as key assets - star fund managers - can pick up and leave pretty much when they choose.
Top tick? Nuveen's P-E owner Madison Dearborn purchased the company for $6.3B in June 2007. TIAA-CREF chief Roger Ferguson's purchase today takes Madison out at near breakeven.
The latest data from Invesco (IVZ -2.1%) suggests U.K.-related attrition is manageable and no major increase in retail redemptions have taken place, says Citi's William Katz, maintaining his Buy rating and $47 price target.
At Artisan Partners Asset Mangement (APAM -8.1%), however, inflows appear to have disappeared, leaving the firm with small outflows. "We suspect the acceleration in U.S. Value outflows may be related to a lumpy mandate loss while we are encouraged by the initial disclosure of assets for High Yield," says Katz, maintaining his Buy rating and $72 price target.
Taken together, and adding in figures from Franklin Resources (BEN -2.2%), "point(s) to uninspiring equities flows, which likely suggest tough(er) flow backdrop for the industry at large." Standing out, says Katz, may be Waddell & Reed (WDR -3.7%) which announced $3.5B in inflows QTD back in early March.
A number of asset manager names were big movers to the upside today, none more than Calamos Asset Management (CLMS +11.1%) which shot higher on about 4x its normal volume. There was a minor insider buy - Chairman and CEO John Calamos buying about $250K worth yesterday - but other than that no evident news.
The team's estimates are almost universally higher than Street consensus, averaging 3.1% above over 16 covered names.
The largest differential is for Gamco Investos (GBL), with BAML now seeing EPS of $1.61 in the December quarter vs. $1.30 previously and $1.30 for the Street. Calamos (CLMS) is lifted to $0.15 vs. $0.12 previously, and consensus of $0.14. Janus Capital (JNS) is seen at $0.20 vs. $0.19 previously and consensus $0.18.
Among those whose estimates are cut are BlackRock, now at $4.40 vs. $4.55 previously, but still ahead of the Street at $4.34. Legg Mason (LM) is reduced to $0.62 vs. $0.71 previously and consensus $0.61.
$JNS - 80% Barchart technical buy signals - 19 new highs and up 16.92% in the last month - Relative Strength Index 70.472%
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Janus Capital Group, Inc. and its subsidiaries provide investment management, administration, distribution and related services to individual and institutional investors through mutual funds, separate accounts and subadvised relationships.