We have reiterated our Neutral recommendation on
Janus Capital Group Inc.
), based on the company's better expense management, strong
assets under management (AUM) and healthy capital position.
However, negative performance fees were a matter of concern.
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Janus Capital has been striving hard to strengthen its
businesses. The company is currently focused on enhancing its
fixed income business including trading and investment. In the
third quarter of 2012, fixed income business recorded positive
net sales for the 15th consecutive quarter at $1.0 billion.
Moreover, the recent strategic alliance with Dai-ichi, the third
largest life insurer in Japan, forms a major part of the
company's policy to develop internationally, and prosper both in
terms of reputation and building relationships as well as
distribution in Tokyo.
Janus Capital continues to improve its operating leverage by
enhancing its organic growth in addition to focusing on reducing
expenses and strengthening both fixed and discretionary cost
savings. We expect the company's strategy of achieving growth
with operating leverage to boost both the top and bottom-line
results and provide a greater foundation to the company's
operations in the future.
To enhance shareholders' value, Janus Capital's board of
directors accelerated quarterly cash dividend payment in December
2012, which would have been declared in January 2013. Such
actions are expected to boost investors' confidence in the
On the flip side, majority of the company's total assets are in
equities, which makes it more vulnerable to the volatilities of
the equity market. The performance of fundamental and
mathematical equity funds have remained volatile in the past few
quarters due to fluctuation in sales, as well as overall
redemptions. Moreover, low interest rate environment affecting
money markets remains a drag on the bottom line. Consequently,
the company's substantial exposure to the money market can hinder
the achievement of targeted goals in the long run.
Nevertheless, given its healthy balance sheet and strategic
initiatives, we believe Janus Capital has the potential to
perform well in the long run. The risk-reward profile of Janus
Capital is currently balanced and hence, we have reiterated our
Neutral recommendation on its shares.
However, Janus Capital currently retains a Zacks #4 Rank, which
translates into a short-term Sell rating. However, the company's
The Blackstone Group LP
) retains a Zacks #2 Rank.