Q2 2008 Earnings Call Transcript

August 14, 2008 11:00 am ET

Nuveen Investments, Inc. (JNC)

Q1 2008 Earnings Call

Nuveen Investments Inc. (JNC)

Q4 2007 Earnings Call

During the latter part of July, there developed a stock market panic as it relates to businesses involved with residential sub prime mortgages, home building, real estate development, and pending Leveraged Buy Outs (“LBO’s”).

The filing also stated that the closing of the merger is not conditioned on the receipt of the debt or equity financing, but it will not be completed until the debt marketing period has elapsed. The marketing period is a 25-day period that begins once all of the closing conditions have been met. The merger has already received antitrust approval from the FTC, but there are multiple lawsuits attempting to enjoin the proposed merger.

Hickey and Walters (Bespoke) submit: In our interview on CNBC Friday afternoon, we discussed our report on end of quarter window dressing and its effect on individual stocks. Over the last four years, we have found that the stocks which tend to perform best up until the last week of the quarter, have outperformed the market during the last week.

Some contend that this is the result of portfolio managers 'tidying' up their portfolios as they ditch the losers and buy the winners in an effort to show they were in the right stocks for the quarter.

I think other asset management companies look starkly cheap in the light of this transaction.

While they are not in the ETF business, it is curious that they have an ETF related site. Could it be they are testing the waters to jump into ETF offerings?

Shares of Nuveen Investments gained $8.98 to close at $63.14 Wednesday on news it has agreed to be acquired by Madison Dearborn Partners LLC for $5.75 billion. Madison Dearborn will pay $65 per share in cash for Nuveen, a 20% premium to Tuesday's close. The purchase is the biggest-ever asset management LBO. "What really attracts private-equity firms is that asset management firms throw out so much cash," said Ben Phillips, MD of Putnam Lovell NBF Securities. "Nuveen has very high asset margins." The company also owns the ETF Connect website. Nuveen traded at 22x earnings prior to the buyout, ahead of Goldman's 11x but behind the 30x of the S&P Midcap Asset Management & Custody Banks Index. Investment manager James Ellman believes Madison Dearborn is getting a bargain: "[T]he deal could have easily been worth 40% more." Nuveen is selling at 16x trailing Ebitda, leading financial blogger Rick Konrad to note that asset management companies Legg Mason (11x) and Federated (11.3x) look cheap by comparison.

The following is the total list of the CEFs that I am aware that Nuveen provides:

INTERVIEW: Fund Firms: Picks of the Pickers by Lawrence C. Strauss

Highlighted companies: Franklin Resources Inc. (BEN), AllianceBernstein Holding LP (AB), T. Rowe Price Group Inc. (TROW), John Nuveen Company (JNC), Legg Mason Inc. (LM), Janus Capital Group Inc. (JNS), Federated Investors Inc. (FII), Cohen & Steers Inc. (CNS)
Summary: Barron's interviews Merrill Lynch fund analysts Cynthia Mayer and Guy Moszkowski, soliciting their views on publicly traded mutual fund providers. Key points and companies:

For the most part, I do agree with the conclusion that there are few bargains to be had in this sector. The profitability of this industry is truly remarkable, but starting to be reflected in generous multiples.

Two names do stand out in my mind: Federated and Nuveen.

Lead Article: Annual List of Top CEOs