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A Pair Trade In Asset Managers Worth Considering For Your Portfolio

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A Pair Trade In Asset Managers Worth Considering For Your Portfolio
  • Invesco Ltd. (NYSE: IVZ) has lost 16.8 percent this year, while Janus Capital Group Inc (NYSE: JNS) has declined just 9 percent.
  • Keefe, Bruyette & Woods' Robert Lee said that Invesco is the firm's "top pick" and recommended buying shares while against a short position in Janus Capital Group.
  • Though Lee mentioned that he feared there were "few near-term catalysts" in the sector, Lee pointed to Invesco's "breadth of its product suite and distribution platform" as reasons behind naming the company his top pick.

KBW's Robert Lee said that there will be "lackluster (at best) organic growth" in asset management names. However, Lee forecasted that Invesco is about to reap benefits from investments made in new products and distribution that will lead to "better organic AUM and revenue growth," particularly relative to peers. Further, the company's "diverse global footprint" will create a strategic advantage that its peers do not enjoy.

Short Janus?

To smooth out general sector weakness, Lee suggested pairing a long position in Invesco with a short position in Janus Capital Group. Comparatively, Janus may have more equity leverage that could help the firm capitalize on a "rebound in equity prices." However, that potential does not justify Janus' premium to Invesco.

Lee placed a $41 price target on Invesco shares, down $2 from $43 prior. The still represents a 24 percent premium over current price. Shares of Janus Capital Group should remain near $15, according to Lee's analysis.

Latest Ratings for IVZ

DateFirmActionFromTo
Oct 2019MaintainsEqual-Weight
Oct 2019Initiates Coverage OnMarket Perform
Sep 2019DowngradesOverweightNeutral

View More Analyst Ratings for IVZ
View the Latest Analyst Ratings

Posted-In: Keefe Bruyette & Woods Robert LeeAnalyst Color Long Ideas Short Ideas Price Target Analyst Ratings Trading Ideas Best of Benzinga

 

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