Franklin Resources: An asset management survivor

Posted Oct 23rd 2009 2:00PM by Joseph Lazzaro
Filed under: Stocks to Buy

The Franklin Resources (NYSE: BEN) Buy call, issued on July 20, 2009 at a price of $73.88, is panning out, which is why I'm Reiterating my Buy rating for the company' shares. If you bought BEN in July, you're up about 54%.

The advice furnished here is to avoid stand-alone money managers as equity plays, but Franklin is an exception. BEN's double-digit asset growth should continue in FY2010 aided by an improved asset mix, and better fund performance across asset classes. BEN's relatively strong balance sheet and declining debt liabilities fleshes-out the positive story.

The First Call FY2009/FY2010 EPS estimates for BEN are $3.61 to $5.63. That FY2010 estimate will likely prove to be low.

However, BEN's shares are slightly over-valued at this juncture – BEN has had an impressive share run in 2009 - hence the recommendation is to buy shares on a pull-back to about $103-107, if given the chance. Keep in mind that shares may not retreat to that level.

Finally, the Sell/Stop Loss has been raised to $72, or to just below cost, from $42.

Stock Analysis: Franklin Resources is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in BEN after a pull-back to about $103-107, then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your BEN position before December 2009. Revised Sell/Stop Loss if you bought shares in this company: $72.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: BEN, Franklin Resources, FranklinResources