Money Management Stocks Gaining Momentum - Investment Ideas
March 31 2011 - 8:00PM
Zacks
The big stock market rally of the last two years has been driven by
massive capital inflows into equities. But a good portion of that
volume has come on the back of large institutional players like
hedge fund and pension managers that control big blocks of cash.
But now, with the rally entering its third year,
many retail investors are finally gaining the nerve to dip back
into a market that saw steep losses in the financial crises of 2008
and 2009. That trend comes to light when taking a look at recent
mutual fund inflows.
Retail Investors Back in the Game
It kicked off with a very bullish January that saw
inflows of $34 billion into equity and fixed-income funds, a very
bullish signal that retail investors are looking to get back in the
game. Since then, inflows into equity and fixed-income funds have
been on a 10-week win streak, more evidence that retail investors
are regaining their appetite for risk
That macro-level shift from a large group of
investors represents a huge opportunity for money and asset
managers, who get paid on both assets under management (AUM) and
the actual performance of those assets.
More Fuel in the Tank?
And even though the bull is two years in the
making, there is plenty of evidence to support more gains. The
S&P500 is on the verge of regaining peak earnings from 2007
while trading at an 18% discount. That means the valuation picture
is compelling, with the S&P 500 trading at a relatively cheap
14X forward earnings.
So if retail investors are piling back into a wide
basket of assets, it means money managers are well positioned to
gain from the trend and increase their assets under management.
Let's go ahead and take a look at our top picks in the
category.
Top 4 Investment Management Stocks
Blackstone Group LP (BX) is a private equity
firm that specializes in private equity, real estate and debt with
a market cap of $8.3 billion. Increased capital inflows and higher
asset prices have been a boon for Blackstone, with this Zacks #2
rank stock recently hitting a new multi-year high. But the
valuation picture is still in check, with a forward P/E of 12X.
Take a look below.
BlackRock, Inc. (BLK) is one of the largest
asset managers in the world and has a market cap of $36 billion.
This Zacks #2 rank stock has an average earnings surprise of 11%
over the last three quarters and a bullish next-year estimate
calling for 15% growth. And with a PEG ratio (PE/Growth) of 1,
shares are trading at the traditional benchmark for value. Take a
look at shares trading near the 52-week high below.
Invesco Ltd (IVZ) is an asset manager that
specializes in high net-worth and institutional investors with a
market cap of $11.7 billion. This Zacks #2 rank stock recently hit
a new multi-year high on an average earnings surprise of 8% over
the last four quarters. With a bullish growth projection of 17% and
compelling valuation, IVZ looks well positioned to benefit from
additional capital inflows. Take a look at the chart below.
Ameriprise Financial (AMP) has been a high
flier for the last 6 months, recently topping off at a new
multi-year high above $65. The investment services and management
company is projected to grow earnings by 14% next year and has a
discounted forward P/E of 11X, well below its peer average of 14X.
Take a look at the chart below.
The Take Away
The strong equity rally of the last two years is
driving capital inflows into investment services and management
companies. And with the trend of strong corporate earnings well in
play, these companies are well positioned to benefit from more
gains.
Michael Vodicka is the Momentum Stock Strategist
for Zacks.com. He is also the Editor in charge of the new Zacks
Momentum Trader Service.
AMERIPRISE FINL (AMP): Free Stock Analysis Report
BLACKROCK INC (BLK): Free Stock Analysis Report
BLACKSTONE GRP (BX): Free Stock Analysis Report
INVESCO LTD (IVZ): Free Stock Analysis Report
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