Gabelli & Co Initiates 'Buy' Rating on Asset Managers BLK, JNS, LM & WDR

March 20, 2009 8:43 AM EDT

Gabelli & Co initiates coverage on Asset Managers, issuing a Buy recommendation on BlackRock (NYSE: BLK), Janus Capital (NYSE: JNS), Legg Mason (NYSE: LM), and Waddell & Reed (NYSE: WDR).

Gabelli analyst says, "As a group, the asset managers should benefit from relatively low financial leverage, recurring revenue streams and flexible cost structures. They should also display operating leverage once the market turns around, as long-term mutual fund savings growth rates remain favorable."

BlackRock should benefit from an evolving asset mix (i.e. investors move from cash instruments to equity and fixed income products which pay higher fees).

Legg Mason remains one of the cheaper names in the group based on projected 2009 EBIT (equivalent to company fiscal year end 2010).

Janus Capital is the most weighted towards equities (~approximately 90%) which obviously increases earnings sensitivity to AUM.

Waddell & Reed has benefitted from strong relative performance at Ivy Advisor funds through Merrill distribution, and maintains its unique "Advisor channel" distribution through its 2300 sales representatives.

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Related Entities

• Janus Capital
• Gabelli & Company

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