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In a lot of ways, asset management firm
Franklin Resources (
BEN) is a leveraged bet on stock prices. After all, the firm has more than $815 billion in assets under management spread across stocks, bonds and hybrid funds -- so as asset prices rise, so too do the fees that Franklin is able to charge for the cash under its watch. So far, betting on BEN has been a pretty good move in 2013 -- and I think that will continue to be the case into the fourth quarter.
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Franklin Resources is the fifth-largest asset manager in the U.S., positioning that helps the firm court big money without alienating retail investors who feel burned by the big banks. BEN's team of 130,000 advisors provides a direct way to attract assets across all of its investment styles, although the skew definitely favors fixed income. While bonds generally earn smaller management fees than equities do, as investors warm up to the equity market, Franklin Resources should see its profitability warm up in kind.
Franklin's net margins are huge, with around 27% of every dollar in management fees working its way to shareholders as profits. A big part of that profitability comes from a better-than-average customer retention rate. Customer acquisition costs are some of the biggest hurdles for asset managers, so BEN's positioning works out very well.
With rising analyst sentiment in shares this week, we're betting on BEN.