Everybody that invests in equities loves it when the stock market rallies. Especially the kind of secular bull market rally that we appear to be in now after the market finally broke out above the 1,600 level on the S&P 500 in June of 2013. One group of stocks that is usually a big benefactor when the market rallies is the top asset managers, and in a new report from Merrill Lynch they think that overall assets-under-management (AUM) at the top mutual fund companies rose an astonishing 1.5% in the month of October.
While many investors are late to the party, the old adage of “better late than never” is what really benefits the top money managers. We screened the Merrill Lynch list for the companies expected to receive big inflows of investor cash.
AllianceBernstein Holding L.P. (NYSE: AB) is expected to see a huge jump of 1.5% in the firm’s AUM. The company provides investment management and related services in the United States and internationally. It offers institutional services, including separately managed accounts, sub-advisory relationships, structured products, collective investment trusts, mutual funds, hedge funds and other investment vehicles to unaffiliated corporate and public employee pension funds, endowment funds, domestic and foreign institutions and governments.
AllianceBernstein investors are paid a fantastic 6.9% distribution. Merrill Lynch rates the stock at Neutral, with a $27 price target. The Thomson/First Call consensus is posted at $28.88. Shares closed on Tuesday at $26.40.
Eaton Vance Corp. (NYSE: EV) is another top company that the Merrill Lynch team expects to see an incredible 1.5% increase in AUM. It is a somewhat neglected mutual fund and closed end fund company money manager. Many on Wall Street view the past underperformance of the stock as providing a buying opportunity for long-term investors as the huge net asset flows in the third quarter and positive capital management will downward pressure on the share count, which translates to stock buybacks. The firm also boasts an incredibly strong distribution system, which can lead to more product sales going forward.
Eaton Vance shareholders are paid 2.3% dividend. Merrill Lynch rates the stock at Underperform and has a $40 price target. The consensus target is at $39.75. Eaton Vance closed Tuesday at $41.73. The huge capital inflow may change some minds on Wall Street soon.
Franklin Resources Inc. (NYSE: BEN) is a mutual fund powerhouse and continues to grow its huge asset base. So it is not surprising the Merrill Lynch team only sees a 0.1% increase for the firm, as the existing AUM is one of the largest on Wall Street. With the well-known Franklin and Franklin Templeton mutual funds still taking in a resurgent level of retail investments, the company could be poised for a tremendous fourth quarter this year.
Franklin investors are paid a 0.8% dividend. Merrill Lynch has the stock rated as a Buy with a $58 price target. The consensus price target is $58.60. The stock closed trading at $56.99.
Invesco Ltd. (NYSE: IVZ) is a company that the Merrill Lynch analysts predict will see a 0.4% increase in AUM in October. The financial services company has strong positions in both equity exchange traded funds and actively managed equity funds, and it is well-positioned to capitalize on inflows into both segments as well as higher asset prices.
Invesco investors are paid a 2.4% dividend. Merrill Lynch has the stock rated as a Buy with a price target of $44. The consensus target is a touch higher at $44.33. The shares closed Tuesday at $41.05.
Legg Mason Inc. (NYSE: LM) is a somewhat forgotten financial name that the Merrill Lynch team sees garnering a huge 1.5% increase in AUM. For years, legendary value investor and portfolio manager Bill Miller led the company’s flagship mutual fund to gigantic gains. Although he has stepped down, the firm looks to benefit with a huge influx of investor money in October.
Legg Mason shareholders are paid a 1.2% dividend. Merrill Lynch has the stock rated at Neutral and a $55 price objective. The consensus price target is $451.75. The stock closed Tuesday at $54.38.
Investors looking to add financials to current portfolio holdings should look at these top asset managers, especially those with a solid dividend. If the stock market continues its upward trend in 2015, the assets will continue to flow in from investors.