Tags: Franklin | balanced | portfolio | BEN

Franklin Rewarded by Balanced Portfolio

By    |   Friday, 16 Dec 2011 04:57 PM

Franklin Resources (BEN), one of the world’s largest money managers with more than $675 billion under management, is reaping the rewards of a balanced portfolio.

The firm has some of the top fund brands in the industry, including Franklin, which is famous for its bond funds; Templeton, which is known for its value-based global investing, particularly in emerging markets; and Mutual Series, renowned for its deep-value and activist investing strategies.

At the end of September, 38 percent of the company’s assets were invested in stocks and 45 percent in bonds, reflecting the shift of investor preference toward fixed income over the past three years.

About one-third of the firm’s assets come from overseas customers, which should stand it well, as wealth is expected to grow faster in much of the world outside the United States.

Franklin’s profit rose 12 percent to $416 million in the quarter ended Sept. 30 from a year earlier. Revenue gained 20 percent to $1.84 billion.

Top of the heap

Standard & Poor’s analyst Royal Shepard assigns a four-star buy rating to Franklin shares. “We think BEN is one of the best-managed asset gatherers and believe its balance sheet is characterized by limited debt and ample cash on hand,” he writes.

“We have a favorable view of its strong operating free cash flow and think its earnings power relative to peers is increasing, given industry shifts toward fixed income assets, in which BEN has a strong track record of solid fund performance.”

Franklin benefits from strong fund performance, consistent revenues, and stringent cost management, Shepard says. While recent outflows from Franklin’s equity products are cause for concern, the company is doing well on the bond side.

“All told, we view the shares as undervalued at recent levels,” Shepard writes.

The company next reports earnings Jan. 26.

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Franklin Resources (BEN), one of the world s largest money managers with more than $675 billion under management, is reaping the rewards of a balanced portfolio. The firm has some of the top fund brands in the industry, including Franklin, which is famous for its bond...
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Friday, 16 Dec 2011 04:57 PM
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