Asset Managers poised to Capitalize on Earnings Beats
The investment management sector has been reaping solid returns over the past few quarters, thanks to higher demand for customized investment strategies and products. It has, in fact, earned a safe-bet status among investors aiming for large profits.
Investment managers generally introduce technologically advanced products and market those (with high advertisement spends) to attract new assets and clients. Subsequently, their performance and brand name help in increasing market share and boosting organic growth.
Michele Ragazzi's Giano Capital returned 1.9% for March, taking the fund's year-to-date performance to 1.7%. Since its inception, Ragazzi's flagship fund has produced a compound annual return of 7.8%. According to a copy of the €10 million fund's March update, a copy of which ValueWalk has been able to review, Giano's most significant investment at Read More
Along with rising assets under management (AUM) over the last couple of quarters on the back of economic recovery, revenues and profits have been on an upswing. However, stringent regulations still remain a concern.
Given the positive sentiment, we could choose a few investment management stocks that are poised to beat earnings estimates this quarter. An earnings beat will raise investors’ confidence in these stocks, leading to rapid price appreciation.
How to Pick?
Picking favorable stocks from the investment management space isn’t an easy task. One way to narrow down the list of choices during this earnings season is by looking at stocks that have the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) – and a positive Zacks Earnings ESP
Earnings ESP is our proprietary methodology for identifying stocks that have the best chances of posting a positive surprise in the upcoming earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
For investors seeking to apply this strategy to their portfolio, we have chosen 3 investment management stocks that are poised to beat earnings estimates this quarter:
T. Rowe Price Group, Inc. (TROW) is a Zacks Rank #2 stock with an earnings ESP of +0.97%. The Zacks Consensus Estimate for the fourth quarter is $1.03 per share. In the past 30 days, estimates have inched up by 2 cents.
Headquartered in Baltimore, Maryland with additional offices across North America, Europe and Asia, T. Rowe Price Group provides services to individual and institutional investors, retirement plans, and financial intermediaries. Through its subsidiaries, the company manages client-focused equity, fixed income, and balanced portfolios. The firm also launches equity, fixed income, and balanced mutual funds for its clients. It invests in the public equity, fixed income, markets worldwide.
The company has registered an average earnings surprise of 0.5% in the trailing 4 quarters.
T. Rowe Price Group is scheduled to announce its fourth-quarter and full-year 2013 results on Jan 28.
Franklin Resources Inc. (BEN) is a Zacks Rank #2 stock with an earnings ESP of +1.08%. The Zacks Consensus Estimate for the fiscal first quarter is 93 cents per share. In the past 30 days, estimates have risen 2 cents.
Headquartered in San Mateo, California, Franklin provides investment advisory and related services to retail mutual funds, institutional and private accounts and other investment products. The mutual funds and other products are sold to the public under 7 brands, namely Franklin Templeton, Mutual Series, Bissett, Fiduciary Trust, Darby, Balanced Equity Management and K2.
The company has registered an average earnings surprise of 1.3% over the trailing 4 quarters.
-Franklin is scheduled to announce its fiscal first quarter 2014 results on Jan 30.
Calamos Asset Management Inc. (CLMS) has a Zacks Rank #1 along with an earnings ESP of +7.14%. The Zacks Consensus Estimate for the fourth quarter is pegged at 14 cents per share. Of late, analysts have been revising their quarterly and full-year estimates upward, suggesting a solid earnings momentum that bodes well for the future.
Illinois-based Calamos provides investment advisory services through its subsidiaries to institutions and individuals, principally in the United States. The company applies a proprietary investment process centered on risk management across an expanding range of investment strategies within the equity, balanced, convertible, high yield and alternative investment classes.
Moreover, the company has registered an average earnings surprise of 50.4% in the past 4 quarters.
Calamos is scheduled to announce its fourth-quarter and full-year 2013 results on Jan 28.
Investment management stocks are expected to perform well in the coming quarters with the demand for personalized investment solutions on the rise. Moreover, most of these companies return the major part of their earnings to shareholders in the form of dividends and share repurchases.
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