The nation’s money-management companies are primed to break out in 2006 as a surging stock market and solid returns in 2005 have investors handing money to asset managers, several industry experts said Friday.
One likely beneficiary is Denver-based mutual-fund manager Janus Capital Group, said Avi Nachmany, director of research at Strategic Insight in New York.
“If you look at the results from 2005, actively managed funds outperformed index funds,” Nachmany said. “That may continue to attract huge amounts of money for asset-management companies.”
The sector received a vote of confidence Friday. An optimistic report written by analyst Michael Hecht of Bank of America Securities upgraded it from an “underweight” rating to “neutral.”
The report singled out Janus as a likely highflier, upgrading the stock from “sell” to “buy.” Hecht called Wall Street’s previous assessment “too backward looking.”
The report also tapped Baltimore-based Legg Mason as another strong performer in the sector. The report raised the Janus target price to $23 per share, causing the company’s stock to spike 7 percent Friday to close at $20.27.
The reason for Janus’ improvement? Steady inflows of money, expanding profit margins and improved earnings estimates for 2006, according to the report.
Other factors include speculation that the Federal Reserve was ready to end its string of interest-rate increases, and an apparent return to growth-style investing. “With growth coming back and Janus’ house in order from an investment perspective, the company is well positioned to benefit,” Hecht said. “We expect above average growth during the next five years of 30 percent.”
Growth funds outperformed value funds by 2 percent in 2005, the first time that has happened since 1999, according to Lipper Inc., the Denver-based mutual-fund researcher. Likewise, inflows to growth funds outpaced inflows to value funds in November, the first month that has happened since 2001.
Nachmany noted that as many as 65 percent of Janus assets are in funds rated as four- or five-star funds by Morningstar, compared to about a third for most mutual-fund managers. As a result, investors are “recognizing the re-emergence of Janus, and that’s attracting more money.”
In 2005’s third quarter, Janus saw its best inflows of money in five years, company documents show. A Janus spokeswoman declined to comment, citing a “quiet period” as the company prepares to release fourth-quarter earnings Jan. 26.
Staff writer Will Shanley can be reached at 303-820-1260 or wshanley@denverpost.com
