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T.J. Raney & Sons/Morgan Keegan & Co.

Morgan Keegan Carves A Regional Niche In The Crowded Investment Industry

At the Memphis investment firm of Morgan Keegan and Co., the word is "momentum." It has to do with the company's stellar performance in 1992, followed by a strong first quarter in 1993.

Morgan Keegan, which purchased the Little Rock investment firm of T.J. Raney & Sons in 1989, saw a 235 percent annual increase in net income for 1992 to nearly $26 million. The company's return on average equity was a resounding 40 percent.

The ball kept rolling into the current year, with first-quarter revenues rising 9 percent over those in 1992 and net income moving up 5 percent. It was the company's 10th consecutive quarter of favorable year-to-year earnings comparisons.

As if that wasn't enough, a quarterly dividend of 7 cents per share and a three-for-two stock split that effectively increased the dividend by 50 percent was announced in May.


Twenty years in the business and recent successes serve as vindication of a conviction to focus regionally. Clients seem to like investing in companies with which they are familiar. Ninety percent of the companies that Morgan Keegan follows are based in the Southeast United States with an in-depth focus on consumer products and services; environmental, transportation and financial services; health care; technology; and energy.

"We don't have anything to add to IBM or Proctor and Gamble research," says Mark Lee, managing director for T.J. Raney.

"But if you want to know something about Federal Express, Dillard's or Physicians Corp. of America, we know everything about it."

The company's most recent research includes companies like Fred's Inc., the Memphis-based discount general store; Maxxim Medical, a diversified medical products company based in Houston; and Mobile Telecommunication Technologies, based in Jackson, Miss.

The success of T.J. Raney & Sons has mirrored its parent company.

When Morgan Keegan purchased T.J. Raney, Ellis Sloan was serving as the Arkansas company's only investment analyst. Customers of the Little Rock office now have the benefit of nine senior investment analysts who are stationed in Memphis, and business is booming.

Company-wide, Morgan Keegan's purchase recommendations outperformed the S&P 500 and NASDAQ Composite indexes in 16 of the 20 quarters from 1988-1992.

"It's a firm run by brokers," says Lee, explaining the company's high performance level.

Allen Morgan Jr. points out that Morgan Keegan's pre-tax profit margin of 213 percent over the last three months, coupled with a return on equity of 34 percent, soars above the performance of comparable firms in the securities business.


Another, perhaps little known fact about T.J. Raney: The company's public finance department was Arkansas' leading manager of long-term tax-exempt bonds through the first three quarters of 1992. In this very competitive field, T.J. Raney must go up against strong local firms, as well as Wall Street investment bankers, for the right to structure and sell Arkansas municipal bonds.

"Working with Arkansas local government to finance schools, public utilities, hospitals and other municipal projects has been our bread and butter since T.J. Raney first started the business in 1931," Lee said.

Morgan Keegan is also highly ranked in Tennessee, Louisiana and Mississippi.

But a firm cannot live by bonds alone.

Half of Morgan Keegan's revenues come from institutional investing--a fairly large proportion for a regional firm.

The detailed investigation of companies required in institutional investing

pays dividends for the individual "retail" investor, who, by all accounts, holds the key to growth in the investment industry.

To capitalize on the growing retail market, Morgan Keegan continues to open branch offices across the South. In July, Morgan Keegan announced the acquisition of Capitol Securities in Austin and Houston. This purchase will give Morgan Keegan a network of 28 offices throughout 11 states.

In other retail-oriented moves, the firm updated its computer system last year, instituted a broker training program and added $10 million in insurance protection for the holders of its cash management account.

With more than 1,000 employees and an equity capital base exceeding $100 million you might be expecting T.J. Raney to make a stab at knocking off some of the local competition. Forget it. T.J. Raney enjoys being the "other guys."
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Publication:Arkansas Business
Article Type:Company Profile
Date:Aug 16, 1993
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