Gabelli & Company, Inc. Analyst Macrae Sykes says Janus Capital Group Inc’s (JNS) stock price could increase in 2014. While Janus has had large outflows and poor investment performance over the last several years, Sykes says key indicators point to improvement for the Colorado-based asset manager. First, Sykes says Janus’ investment performance should change dramatically by the middle to end of 2014.
“Their three-year numbers had been majorly impacted by poor performance in 2011,” Sykes says. “Because of this negative performance on a three-year basis, the firm had negative performance fees in 2013 of about $82 million, which were about 10% of overall investment fees. So, to the extent that they can reverse that or even make some progress on that, that’s significant operating leverage and also additional cash flow to fund operations and potentially buy back stock.”
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What’s more, Sykes says three Janus insiders, including the firm’s CEO, have recently bought back stock, which he says is a good sign in terms of expectations for the shares, which currently trade at around six times EBITDA. And, Sykes adds that Janus’ stock price could be buoyed by a potential takeout by Dai-ichi Life (TYO:8750), a strategic partner who bought a 20% stake in Janus.
“Really, any change in expectations could be a significant springboard for the equity price,” Sykes says.
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