Money management companies will face significant earnings and operating expense struggles in 2009, but those managers with minimal balance-sheet risk should be among the first to benefit from any improvement in the capital markets, according to Keefe, Bruyette & Woods 2009 asset manager preview.
Franklin Resources is the firms top pick for a money manager stock to hold in 2009, but KBW also sees BlackRock, Eaton Vance, Invesco, and T. Rowe Price as strongInvesco, Invesco, and T. Rowe Price as strong picks.
Most asset management stocks will likely benefit from any improvement in the capital markets, but investors should focus on those stocks with strong franchises, above-average leverage to an improved operating environment, exceptionally strong balance sheets and a valuation that appears to at least be discounting much of the weakness, the preview said.
KBW is expecting growth in assets under management to be modest in 2009, after suffering a sharp decline in 2008. The firm is forecasting a 29% point-to-point decline in AUM for 2008, followed by an estimated 7% year-over-year increase in 2009, the preview said.