Big money shapes the
, but the sources can vary.
Ed Yardeni, president of Yardeni Research, pointed out in a
blog post in December that "corporate treasurers have been
driving the bull market in stocks." Yardeni noted that buybacks
for the S&P 500 "totaled $406 billion over the past four
quarters through Q2."
Recent reports now say that retail money is
flowing back into equity funds
. If it continues, then the new flow could add to a bullish
Waddell & Reed Financial (
) stands to gain from such a development, but the investment
management company is cautious.
CEO Henry Herrmann acknowledged in a late-January conference
call that January was showing a sharp increase in the flow to
equities. "It is still too early to tell how sustainable the
improvement is," Herrmann said.
During the same call, CFO Daniel Connealy said that
the average investor
is still impacted by the global financial crisis and "a large
percentage of everybody in this industry shareholder base is in
the baby boomer generation. That's a group that would, just from
demographics, have been mindful about preservation of capital
during this last four- to five-year period."
Boomers, however, are known for not acting their age. So, it's
unlikely they will be happy with
for long. A return to equities seems inevitable.
Waddell & Reed's earnings jumped 33% in each of the past
two quarters. Revenue rose 5% and 11% in the same periods.
After-tax margin was 17.8% and 17.3% -- the highest in at least
The three-year Earnings Stability Factor is 8 on a scale of 0
(calm) to 99 (wild).
In December, the company raised its quarterly dividend to 28
cents a share from 25 cents. The annualized yield is 2.7%. The
company also paid a $1-a-share special dividend in December.
The conference call offered one more tidbit. Connealy said,
"Is it ... a big rush from fixed income to equities quickly? No,
it's probably more measured and thoughtful, but I suspect that
that's what we're at -- the beginning."
Given that a retail investment rush often occurs near market
tops, measured could be good news.