BETTING ON A MONEY MANAGER

BETTING ON A MONEY MANAGER

As the market tries to mount an advance, a group to watch is money management firms, whose shares have tumbled in the long meltdown. These stocks move in lockstep with the overall market, so pros who believe beleaguered equities have hit bottom are following the money managers' lead. One stock they find attractive is Affiliated Managers Group (AMG), which stood at 44.55 on Apr. 8, down from 136.50 in mid-2007. "Their revenues are based on the assets they manage, which rise or fall with the market," notes George Putnam, editor of The Turnaround Letter, who is bullish on AMG and the sector. The stock sank to 17.93 last Nov. 21, as AMG's assets, which were $275 billion in 2007, dropped, hitting $117 billion by yearend 2008.

AMG owns stakes of up to 70% in other asset managers, such as Tweedy Browne, Third Avenue, and Essex Investment. Analysts have cut their 2009 earnings forecasts. Still, 6 out of 11 analysts who track AMG rate it a buy, and none a sell. Alexander Paris of Barrington Research, who rates the stock outperform, says it is way oversold, as its 2008 fourth-quarter earnings beat analysts' estimates. He figures AMG will post earnings of $4 a share in 2009 on sales of $835 million, and $5.75 in 2010 on $935 million. Paris sees AMG rising to 55 when investors jump back into equities.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.