Money Managers With Investment Appeal

 | Apr 20, 2015 | 2:00 PM EDT
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Millions of baby boomers are near or entering retirement. Add this to an improving economy and the large number of companies trying to help their employees prepare for retirement, and you get a strong demand for professional money management services. In fact, the Bureau of Labor Statistics predicts demand for personal financial advisors in the coming years will increase "much faster than average."

This makes sense, since effectively managing money requires knowledge few of us have nor want to spend the time acquiring.

I offer professional money management services through my company, Validea Capital, so I am aware of the need people have for money management expertise. There are also a number of very large, publicly traded firms offering such services. You do not need to have money managed by them to appreciate them as investment opportunities. Having such companies in one's investment portfolio makes sense for most folks.

BlackRock (BLK) is an example. This is the largest asset manager in the world, with over $4 trillion worth of assets under management. Yes, trillion. Because of the amount of assets it manages and the clout that comes with it, The New York Times recently referred to BlackRock's CEO, Laurence D. Fink, as perhaps "the world's most important shareholder."

Not only is BlackRock large and powerful, it is well run and has a well-priced stock. Peter Lynch, the great mutual fund manager, relied on the price-to-earnings relative to growth ratio (P/E/G) as a vital variable when deciding which stocks to buy and which to pass by. Years ago, I automated Lynch's strategy, and ever since, I have relied on it to choose stocks to recommend to my readers. Right now, BlackRock is a Lynch-strategy favorite because its yield-adjusted P/E/G is 0.91 (up to 1.0 is acceptable). This means that, given today's stock price, you are buying growth for a reasonable amount. Another reason to buy BlackRock, according to the Lynch strategy, is the company's equity-to-assets ratio of 11%, well above the 5% minimum required.

T. Rowe Price (TROW) is not as large an asset manager as BlackRock, but it still is sizable with about three-quarters of a trillion dollars of assets under management. Like BlackRock, Price is a Lynch strategy favorite. Its P/E/G is the same as BlackRock's, 0.91, and its equity-to-assets ratio is a very strong 96%.

Franklin Resources (BEN) has in its product portfolio such well-known mutual fund names as Franklin and Templeton, and $880 billion in assets under management. Like the two asset managers I just discussed, Franklin earns a high grade from my Lynch-based strategy. The firm's yield-adjusted P/E/G is a solid 0.79, while its equity-to-assets ratio is strong at 71%.

These three firms have enviable track records as asset managers and are major international players in the asset management field. If you lack an asset manager in your portfolio, any of these firms would be an excellent portfolio addition. 

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