Sector Snap: Fortress leads asset managers higher

Fortress Investments leads asset managers higher following upgrade from Barclays Capital

• On 3:44 pm EDT, Wednesday September 9, 2009

NEW YORK (AP) -- Fortress Investment Group led asset managers higher in Wednesday trading after Barclays Capital upgraded the stock, and commented favorably on the group overall.

Analyst Roger Freeman raised his rating on Fortress to "Overweight" from "Equal Weight," and spiked his price target to $9 from $3, saying he prefers alternative asset managers to the traditional companies right now.

Fortress manages investments for pension funds and endowments, and manages hedge funds and alternative investment vehicles.

"We are favorably disposed toward asset managers, though our view on the traditional asset managers is clearly more neutral following a significant outperformance since the March lows versus the market and recent underperformance as investors grow skeptical of further market gains," Freeman wrote in a note to clients. He said he prefers Fortress to private equity firm The Blackstone Group, which he upgraded to "Equal Weight" from "Underweight" because the stock is less expensive, even though he sees Blackstone as "the highest quality name."

Fortress shares jumped 66 cents, or 14.8 percent, to $5.13 as volume spiked to more than double normal daily trade. Blackstone shares added 33 cents, or 2.6 percent, to $13.01.

Freeman also upgraded Och-Ziff Capital Management Group to "Overweight" from "Equal Weight," and raised his price target to $13 from $5. He said he prefers the hedge fund manager over GLG Partners Inc., because it has "a cleaner earnings story over the next couple of years, a better track record through the downturn and likely stronger client relationships" because it didn't block redemptions as the market struggled.

Och-Ziff shares added 42 cents, or 3.9 percent, to $11.21. GLG shares gained 9 cents, or 2.3 percent, to $4.

Among traditional asset managers, Freeman upgraded Invesco to "Overweight" from "Equal Weight" and set a $25 price target and started coverage of Franklin Resources Inc. at "Overweight" with a $104 price target. "We view both asset managers as highly diversified, particularly with respect to international exposure where we are seeing stronger industry inflows, strong managements with proven track records integrating businesses, and balance sheet flexibility to pursue strategic priorities," he wrote.

Invesco shares rose 46 cents to $22.81. Franklin shares added $1.69 to $97.30.

Freeman also started coverage of Eaton Vance at "Equal Weight," with a $29 price target. He said he sees the stock as a strong long-term play but in the short term, weak demand for its tax advantaged offerings and the "still moribund closed end fund market" could hold shares back. Eaton Vance gained 32 cents to $28.37.

Federated Investors Inc. also got an "Equal Weight" rating and $29 price target. Freeman said it is "at the top of its peers" in the money market space, but there is concern it that capital outflows from money markets may outpace assets the company could acquire through market share gains. Federated shares added 30 cents to $26.43.

Finally, Waddell & Reed Financial Inc. got an "Equal Weight" rating and $29 price target. He said the company has a lot of growth potential, but he believes it is proceeding cautiously and is reliant on a few key proprietary funds, which could expose it to some concentration risks. Waddell & reed shares slipped 29 cents to $26.39.

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