Cabot Top Ten Trader Editor Mike Cintolo wrote this about a month ago:
“As the general market has heated up, we’ve noticed more and more ‘Bull Market stocks’—brokerage, investment bank and asset management firms, each of which directly benefit from higher stock prices and increased trading activity—pushing to new highs.”
The market advance has slowed since then, with the major indexes retreating to end-of-January support levels in recent days. But so far the advance is just paused, not stopped, and I’m still seeing notable interest in what Cintolo calls “Bull Market Stocks.” The stocks themselves are giving a bullish indicator too, for the most part holding their January gains. Here are a few ideas from the sector.
In the latest Investment Digest, Argus Analyst David Ritter recommended financial advisor and asset manager Lazard (LAZ). He wrote in part:
“We are reiterating our BUY rating on Focus List selection Lazard (LAZ) and raising our target price to $45 from $40. Our EPS estimates for 2013 and 2014 are above consensus.
“While the global M&A market has remained relatively soft, Lazard has continued to pick up market share from the bigger banks. Asset management revenues, which often account for up to half of Lazard’s total, have also held up reasonably well despite choppy markets. ...
“We continue to prefer the stocks of global financial services firms that compete in secular growth markets and that have relatively clean balance sheets and focused business models. Lazard fits that profile.
“We believe that LAZ remains undervalued relative to its own trading history and relative to the valuations of both large money managers and boutique advisory firms. The dividend was recently increased by 25% and yields about 2.1% at current levels. Lazard has been buying back stock over and above that needed to offset dilution from issuance to employees.” — David Ritter, Argus Weekly Staff Report, February 18, 2013
Also in the latest Investment Digest, David Fried, editor of The Buyback Letter, made a short-term recommendation of Legg Mason (LM), an asset management company. Here’s part of what he wrote:
“Legg Mason, Inc. (LM) is a global asset management company providing investment management and related services to institutional and individual clients, company-sponsored mutual funds and other pooled investment vehicles. It has $654 billion in assets under management as of January 31, 2013, up from $649 billion a month earlier.
“Legg Mason has a market cap of $3.62 billion, a P/E ratio of 22, above the S&P 500 P/E ratio of 17.7. Shares are up about 7.9% year to date. Analysts praise the company in several areas, such as its revenue growth, attractive valuation levels, increase in stock price during the past year and increase in net income. Share price rose recently on news that investment firm Gabelli announced it had obtained a 5% share in LM. ... In the last 12 months, management has reduced shares outstanding by 5.7%. Buy.” — David R. Fried, The Buyback Letter, February 14, 2013
Michael Cintolo’s recommendation when he originally noted the resurgence of “Bull Market Stocks” is still a good opportunity here. His pick in the sector was investment manager BlackRock, Inc. (BLK), which has demonstrated excellent momentum in recent months. Here’s some of what he wrote:
“BlackRock might be the granddaddy of the financial management group; the company has an almost unbelievable $3.8 trillion of assets under management! Obviously, that’s not mom-and-pop investors, but big institutional pension and hedge funds, as well as some very wealthy individuals.
“One big driver is the firm’s iShares business, which it purchased in 2009 and has been a big hit; BlackRock’s top brass alluded to a secular shift into ETFs and more passive investments, which plays right into iShares’ hands.
“Best of all, management is committed to returning cash to shareholders—it just hiked the dividend 12%, resulting in an annual yield just south of 3%, and continues to buy back shares quarter after quarter; the company repurchased about 5% of its shares last year, and has authority to buy another 5% going forward.
“With sales growth picking up, earnings growth accelerating and the potential for better-than-expected earnings in 2013, if the market continues its winning ways, we think BlackRock has solid upside.” — Michael Cintolo, Cabot Top Ten Trader, January 21, 2013
Technically, BlackRock has held up very well since Cintolo’s recommendation a month ago, extending its base around 235. I think it could be a good buy right here.
Get more on Cabot Top Ten Trader here.
Wishing you success in your investing and beyond,
Chloe Lutts
Editor of Investment of the Week
P.S. I just finished choosing 25 great new income securities—stocks, trusts, ETFs, REITs and mutual funds—for this month’s issue of Dick Davis Dividend Digest, and I’d like to send it to you free.