Franklin Resources (BEN) is well-situated to hold its ground in the U.S. through the expected rotation to equities and has the ability to take advantage of growth internationally, positioning BEN as a top-rated asset management stock, according to Lucas Montgomery, Research Analyst at Sanford C. Bernstein & Co.
“The opportunity that really stands out as not getting enough credit for its organic growth is Franklin Resources. But this is a company that has a lot of the advantages that we just talked about: international distribution, international manufacturing, strong third-party distribution…With nearly $800 billion in AUM, it has the size and scale to subsidize expensive investments in international operations, and it is already operational in many non-U.S. developed and developing markets,” Montgomery said.
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Despite investor concerns of how BEN will fare in the rotation out of fixed income due to its asset mix that is skewed toward fixed income, Franklin is poised to be a solid long-term investment opportunity, Montgomery says. He says that BEN‘s type of fixed income product mix as well as the company’s equity products make BEN capable of holding ground through the rotation.
“I am not convinced that when rates do go up, Franklin is going to feel the same amount of pain that some other fixed income managers will, because its fixed income product mix is largely developing market fixed income — very short duration of under two years. I also don’t think some investors give them enough credit for the equity products it has that will allow it to participate in a rotation to equities. And I also think that fixed income will, to a large degree, be self-correcting, so that higher rates will ultimately bring investors back to fixed income, since they can actually hit some yield there,” Montgomery said.
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