Consolidation Coming to the BuySide?
Although some BuySide shops have sailed through the past few months with nary a hiccup, others are clearly hurting, at least if you punch up their ticker symbols.
We are all for picking through the wreckage; the business model is an attractive one, as many people visiting this site could readily attest. Has the time finally come to nibble at the stocks of down and out asset managers?
The new CEO of Legg Mason has been buying stock in the open market, and might even know something we don’t. Although, ultimately, he might only be as good as Bill Miller’s last trade.
Legg Mason’s shares have traded heavy in recent months, which does not sit well with one guy:
Shares of Legg Mason (NYSE: LM) are near the bottom of their 52-week range because, according to Inside Value advisor Philip Durell said, “The market has inordinately discounted the shares on [short-term] concerns. ... This is stupid.”
With talent like superstar investor Bill Miller on the roster, Legg will rediscover its investing mojo and assets under management (AUM) will flow back to the company. Shares have dropped more than 20% since Philip recommended it in the December 2006 issue of Inside Value and another 3% since he re-recommended the company two months ago. Motley Fool
We would argue that the market is smart, and Philip is the stupid one. He is unlikely to get any smarter, but he might eventually get bailed out of his losing position.
Indeed, several industry leaders think a wave of consolidation could hit the asset management industry in the months ahead:
The asset management industry is ripe for consolidation, according to Larry Fink, chief executive of BlackRock Investment Management, the world’s largest quoted asset manager, and Bruce Wasserstein, chairman and chief executive of Lazard.
Fink, whose company’s assets under management rose to almost $1.4 trillion (€945bn) at the end of last year, said: “There are a lot of interesting acquisition opportunities in the asset management industry, although we have no plans to talk to anyone. Many companies are trading at low price/earnings ratios. Asset managers need scale, because risk management systems are expensive.”
Wasserstein talked about asset management acquisitions during the bank’s results presentation last week: “We are thinking about companies that complement our existing business geographically or with different product expertise. Nothing is imminent but we have an able team focused on asking strategic questions.” Financial News
While Legg Mason might not be a target, it sounds like geographic expansion and tuck in acquisitions might allow CEO’s to quickly fill holes in their strategy offerings, and buying rather than building is a quicker fix.
Many of these buyout candidates are not publicly traded, but you might want to pick through the ones that are. The markdown might not last forever, and you will want to beat Bruce to the punch before he bids ‘em up.
Calling the Bottom ... or Not
Motley Fool
BlackRock’s Fink sees chances to buy rivals
Financial News
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.
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