Waddell & Reed Financial (WDR) is expected to benefit from the flow of capital from fixed income into equities thanks to its well-known Ivy Asset Fund, and the financial firm currently trades at a compelling valuation with growth expected over the next five to 10 years, says Macrae Sykes, Research Analyst at Gabelli & Company, Inc.
“I highlight the Ivy Asset Fund, Waddell & Reed’s flagship product, which had a strong year in 2012. And I think because of its place in the global allocation space, it is likely to remain competitive on a relative basis for investment performance, because a lot of its competitors rely on fixed income returns to generate performance due to the nature of their asset-allocation parameters,” Sykes said.
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Sykes says WDR has a strong management team and a positive operating margin, and the company is further attractive to investors thanks to its dividend yield.
“Waddell & Reed we’ve mentioned it before — this should be a beneficiary of this movement to equities, because it has a strong position with the Ivy Asset Fund with its brand name and terrific firm distribution. It’s a very good management team led by Hank Herrmann. The company should also benefit from increased operating margins. Despite the share price increase year to date, it still has a compelling valuation. We think this company can continue to grow over the next five to 10 years. It also has a nice current return in terms of the dividend and just a very well-aligned institution,” Sykes said.
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