Jefferies Says Legg Mason Is Moving From 'Defense To Offense,' Upgrades To Buy

In a report published Wednesday, Jefferies analyst Daniel Fannon upgraded shares of

to Buy from Hold with a price target raised to $67 from a previous $50 given the company's "strong" growth outlook and diversified portfolio. Fannon wrote that Legg Mason has recorded $11 billion of inflows over the last four months due to the disruption at Pimco as well as the "ongoing momentum" across several affiliates including Western, Clearbridge and Brandywine. The analyst added that while the initial wave of market share gains at the expense of Pimco will subside in the near term, the company holds plenty of potential for new business wins in the institutional channel. Fannon also argued that the company marked several one-time expenses throughout the past eight quarters which created "noise" around its income statement. The analyst argued that these expenses have now created a "clean look" and operational improvements should begin to emerge and the company's improved product mix should drive ongoing operational leverage. Bottom line, Fannon argued that Legg Mason will begin demonstrating organic growth trends that coupled with a consistent buyback program and a modestly improving profile positions the company positively versus its peers.