Deutsche Bank analyst Brian Bedell initiated coverage of five asset managers, handing out "buy" ratings to Legg Mason Inc., Eaton Vance Corp. and WisdomTree Investments Inc. and "hold" ratings to Janus Henderson Group Plc and Federated Investors Inc.
Bedell wrote in an Oct. 16 research note that Legg Mason is underappreciated by investors despite the fact that the company is in later stages of excellent strategized changes and is set for 20% EPS annual growth rate over the next two years. He wrote that improving long-term assets under management organic growth would define the company's success over the next 12 months.
Bedell's EPS estimates for the company are $2.70 for 2017, $3.21 for 2018 and $3.85 for 2019.
Eaton Vance's $5 billion acquisition of Parametric in 2003 has grown to $213 billion and has helped the company thrive in niche areas, the Deutsche Bank analyst said. Additionally, the company has surpassed other asset managers in key areas over the past 12 months and Bedell expects the company to continue on the path of publicly traded manager organic growth on an assets-under-management and revenue basis.
Bedell's EPS estimates for the company are $2.56 for 2017, $3.23 for 2018 and $3.46 for 2019.
WisdomTree's industry market share in currency hedged equity ETFs makes the company a major pure-play on smart beta/factor-based investing concept, the analyst wrote. He thinks the company's organic growth will act as the main catalyst for WisdomTree, which justifies the "buy" rating.
Bedell's EPS estimates for the company are 25 cents for 2017, 37 cents for 2018 and 40 cents for 2019.
The Deutsche Bank analyst believes Janus Henderson has the potential for stronger long-term growth following the merger of Henderson Group Plc with Janus Capital Group Inc. However, he believes that the company is more exposed to less favorable trends for active equities, mutual fund vehicles, and more. Hence, Bedell has opted for a wait-and-see approach, assigning a "hold" rating to the company.
Bedell's EPS estimates for the company are $2.38 for 2017, $2.55 for 2018 and $2.76 for 2019.
Despite Federated Investors' strong historic position among U.S. money market managers, the company has entered into equity and fixed income as it looks to shift its business mix toward higher-fee and long-term assets. The analyst expects the company to do well in the long run but expects that earnings growth will be restrained over the next few years. Therefore, he has given the company a "hold" rating.
Bedell's EPS estimates for the company are $2.06 for 2017, $2.13 for 2018 and $2.11 for 2019.
The analyst's price targets on Legg Mason, Eaton Vance, WisdomTree, Janus Henderson Group and Federated Investors are $44, $57, $13, $36 and $31, respectively.