12 Buy-Rated Investment Companies

NEW YORK ( TheStreet) -- An analysis of highly-rated large and mid-cap investment companies by TheStreet Ratings highlights some solid picks - including two dividend plays -- among a group that is not universally loved by analysts.

The following 12 U.S. investment companies have market capitalizations of at least $1 billion and are rated B-minus (Buy) or higher by TheStreet Ratings. Most have grown their revenue over the past year, in-line with the overall market recovery. The group is in ascending order and by upside potential based on the median price target among analysts polled by Thomson Reuters.

12. Ares Capital

Company Profile

Ares Capital ( ARCC) of New York is a private equity firm that focuses on middle market companies in manufacturing, business services, consumer products, healthcare and IT. Shares closed at $16.45 Tuesday, for a total return of 34% over the previous year. Based on a quarterly payout of 35 cents, the shares have a dividend yield of 8.51%.

Income Statement

For the second quarter, Ares Capital reported $330.2 million in net income, or $1.73 a share, rising from $34.8 million, or 36 cents a share, a year earlier, and reflecting the acquisition of Allied Capital Corporation in April, for which Ares recorded a gain of $195.9 million.

Second-quarter net investment income after taxes was $49.5 million, rising from $31.9 million in the second quarter of 2009.

The company is scheduled to announce its third-quarter results on November 4.

Balance Sheet

Ares Capital's balance sheet nearly doubled in size from the Allied Capital acquisition, to $4.1 billion as of June 30. The fair value of the investment portfolio was $3.8 billion, and had 71% concentrated in debt securities.

The company's ratio of debt to capital, based on second-quarter financials, was 0.31, which doesn't include debt-to-capital ratio is $200 million in senior unsecured 30-year notes the company issued on October 15, with a coupon of 7.75%.

Stock Ratios

Shares trade for 11 times the consensus 2011 earnings estimate of $1.49 a share, among analysts polled by Thomson Reuters.

Analyst Ratings

Out of 15 analysts covering the Ares Capital, 11 rate the shares a buy, three have hold ratings and one analyst recommends investors sell the shares.

11. Greenhill & Co.

Company Profile

Greenhill & Co. ( GHL) of New York is an investment bank providing advice on mergers & acquisitions, restructurings and capital raising activities for clients worldwide. Shares closed at $75.51 Wednesday, down 13% for one year.

Based on a quarterly payout of 45 cents, the shares yield 2.38%.

Income Statement

For the third quarter, Greenhill reported net income available to common stockholders of $14.5 million, or 47 cents a share, down from $30 million, or $1.01 a share a year earlier. Total third-quarter revenue was $84.1 million, down from $116.3 million in the third quarter of 2009, but chairman Robert Greenhill said the firm was "seeing the beginning of an upturn in market activity, as financial advisory revenue increased to $97 million from $42.4 million a year earlier.

Balance Sheet

As of September 30, the company reported cash of $56.8 million, investments of $171.6 million and short term debt of $62.5 million. Greenhill's third-quarter earnings release didn't include a balance sheet.

Stock Ratios

The shares trade for 22.7 times the consensus earnings estimate of $3.32 for 2011.

Analyst Ratings

Out of six analysts covering Greenhill & Co., two have buy ratings, three recommend holding the shares and one recommends investors sell the shares.

10. W.P. Carey & Co.

Company Profile

W.P. Carey & Co. ( WPC) of New York provides lease-back financing, build-to-suit and triple net leasing, and runs an investment portfolio of commercial properties leased to corporate clients. The company also serves as an advisor to real estate investment trusts that it sponsors under the Corporate Property Associates (CPA) brand name. Theses REITS are publicly held but are not actively traded.

W.P. Carey's shares closed at $30.64 Tuesday, returning 14% over the past year. Based on a quarterly payout of 50.8 cents, the shares have a dividend yield of 6.63%.

Income Statement

The company reported net income of $23.4 million, or 59 cents a share, for the second quarter, increasing from $15 million, or 37 cents a share, during the second quarter of 2009.

REIT and REIT management companies commonly use another earnings measure called funds from operations, or FFO, which is defined by the National Association of Real Estate Investment Trusts as GAAP net income, "excluding gains (or losses) from sales of properties plus real estate related depreciation and amortization and after adjustments for unconsolidated joint ventures." W.P. Carey reported second-quarter adjusted FFO of $38.9 million, or 98 cents a share, increasing from $30.1 million, or 75 cents a share, a year earlier.

The company is scheduled to release its third-quarter earnings results on November 4.

Balance Sheet

Total assets were $1.1 billion as of June 30, increasing from slightly from a year earlier. Real estate investments totaled $559.4 million and the company's ratio of debt to capital was 0.38

Stock Ratios

The shares trade for 17.7 times earnings.

Analyst Ratings

Two analysts cover W.P. Care, with one rating the shares a buy and the other recommending investors hold the shares.

9. Eaton Vance Corp.

Company Profile

Eaton Vance ( EV) of Boston is a fund manager serving individuals and institutions. Shares closed at $29.75 Tuesday, up 1% over the previous year.

On October 20, the company increased its quarterly dividend to 18 cents from 15 cents a share, for a forward dividend yield of 2.42%. Eaton Vance paid a special dividend of nine cents a share in June.

Income Statement

For the fiscal third quarter ended July 31, Eaton Vance reported net income attributable to common shareholders of $41.8 million, or 34 cents a share, increasing from $31.2 million, or 25 cents a share, a year earlier. Total revenue was up 20% year-over-year, to $214.8 million, as equity markets improved and assets under management grew to $173 billion from 144 billion a year earlier.

The company is scheduled to report its results for the fiscal fourth quarter on November 23.

Balance Sheet

The company's ratio of debt to capital was 0.57 as of July 31, and its quick ratio was a strong 2.47.

Stock Ratios

The shares trade for 16.9 times the consensus earnings estimate of $1.76 for fiscal 2011.

Analyst Ratings

Out of 14 analysts covering Eaton Vance, four rate the shares a buy, nine have hold ratings and one analysts recommends investors sell the shares.

8. T. Rowe Price Group

Company Profile

T. Rowe Price ( TROW) is an investment manager serving retail and institutional investors, headquartered in Baltimore, Md. Shares closed at $54.59 Tuesday, for a total return of 4% over the past year.

Based on a quarterly payout of 27 cents, the shares yield 1.98%.

During the first three quarters of 2010, the company repurchased five million shares for $240 million.

Income Statement

Third-quarter net income was $169.1 million, or 64 cents a share, increasing from $132.9 million, or 50 cents a share, during the third quarter of 2009. Net revenue increased 18% from a year earlier to $498.1, as equity markets recovered.

Net cash inflows during the third quarter were $8 billion and with market valuation increases and investment income of $48.6 billion in the third quarter, assets under management totaled $439.7 billion.

In its third-quarter 10-Q filing with the Securities and Exchange Commission, T. Rowe Price said it would "make a capital contribution to certain of our sponsored money market mutual funds," in order to "offset the cumulative net losses realized by those funds in recent years in order to allay any fund shareholder concerns that might arise as a result of new SEC disclosure rules." The company said it expected the capital contribution result in a fourth-quarter charge of about $17 million.

Balance Sheet

T. Rowe Price had total assets of $3.2 billion as of September 30. Cash and equivalents totaled $743 million and the company had no long-term debt.

Stock Ratios

The shares trade for 19.1 times the 2011 consensus earnings estimate of $2.85 a share.

Analyst Ratings

Out of 21 analysts covering T. Rowe Price, 12 rate the shares a buy, while the other nine recommend investors hold the shares.

7. Ameriprise Financial

Company Profile

Ameriprise Financial ( AMP) of Minneapolis provides financial planning, asset management, annuities and insurance services. Shares closed at $50.57 Tuesday for a total return of 29% for one year.

Based on a quarterly payout of 18 cents, the shares yield 1.42%.

Income Statement

Ameriprise on Wednesday reported third quarter net income of $344 million, or $1.37 a share, increasing from $272 million, or $1.04 a share, during the third quarter of 2009, and beating the consensus estimate of $1.08 among analysts polled by Thomson Reuters.

Net operating revenues increased 26% year-over-year, to $2.4 billion

Balance Sheet

In its third-quarter earnings release, the company said its ratio of debt to capital was 0.20 and that it had $1.5 billion in excess capital. Ameriprise repurchased 3.6 million shares during the third quarter, for $153 million.

Stock Ratios

The shares trade for 10.1 times the consensus earnings estimate for 2011 of $5.01.

Analyst Ratings

Out of 11 analysts covering the company, seven rate Ameriprise a buy and four recommend investors hold the shares.

6. Raymond James Financial

Company Profile

Raymond James Financial ( RJF) of St. Petersburg, Fla. is a holding company providing various services, including investment brokerage, underwriting and banking, with operations in the U.S., Canada and Europe. Shares closed at $28.43 Tuesday, up 15% over the prior year.

Based on a quarterly payout of 11 cents, the shares have a dividend yield of 1.55%.

Income Statement

For the fiscal fourth quarter ended September 30, Raymond James reported net income of $69.1 million, or 55 cents a share, increasing from $43.0 million, or 35 cents a share, a year earlier. Net revenue for the fiscal fourth quarter increased 12% year-over-year to $747.9 million.

Balance Sheet

Total assets were $17.2 billion as of September 30. Nonperforming assets - including problem loans and repossessed real estate -- totaled $181.9 million as of September 30, or 2.48% of total assets. The nonperforming assets ratio increased from 2.37% the previous quarter and 2.10% a year earlier. Net charge-offs - loan losses less recoveries - during the fiscal fourth quarter were $20.55 million, which was matched by the company's provision for loan losses.

The company estimated a strong Tier 1 capital ratio of 12.1% and a tangible common equity ratio of 11.71% as of September 30.

Stock Ratios

The shares trade for 11.6 times the consensus earnings estimate of $2.69 a share for the current fiscal year that ends in September 2011.

Analyst Ratings

Out of five analysts covering the company, two rate Raymond James a buy while the other three recommend investors hold the shares.

5. SEI Investments

Company Profile

SEI Investments ( SEIC) of Oaks, Penn. provides various investment and fund processing and management services to financial institutions, advisors and high net-worth clients. Shares closed at $21.98 Tuesday, returning 19% over the previous year.

Income Statement

The company reported third-quarter net income of $56.4 million, or 30 cents a share, increasing from a pro forma $52.7 million, or 27 cents a share, a year earlier, reflecting the deconsolidation of its LSV Asset Management affiliate.

Total revenue increased 2% year-over-year to $219.5 million for the third quarter, with sales in the Institutional Investors segment increasing 8% to $51 million and increasing 15% in the Investment Managers unit to $40.5 million, more than offsetting weakness in the Private Banks segment and flat revenue in the Investment Advisors segment, however, operating profit increase in all segments, mainly from cost reductions.

Balance Sheet

SEI's ratio of debt to capital is a low 0.11 and its quick ratio is a very strong 5.52.

Stock Ratios

The shares trade for 16.9 times the consensus earnings estimate of $1.30 a share for 2011.

Analyst Ratings

Out of five analysts covering SEI Investments, three have buy ratings and the other two recommend investors hold the shares.

4. Franklin Resources

Company Profile

Franklin Resources ( BEN) of San Mateo, Calif. is an investment manager providing services to individual and institutional investors, under the Franklin Templeton brand. Shares closed at $115.98 Tuesday, up 3% over the previous year.

Income Statement

Franklin Resources on Thursday reported net income of $373 million for the fiscal fourth quarter ended September 30, or $1.65 a share, missing the consensus estimate of $1.74 among analysts polled by Thomson Reuters. Earnings increased from $367 million, or $1.59, a year earlier. Despite a 23% year-over-year increase of operating revenue to $1.5 billion in the fiscal fourth quarter, bottom line results only slightly improved because of a decline in gains on consolidated sponsored investment products to $2.4 million from $42.8 million the prior year.

Also affecting earnings for the fourth fiscal quarter was an effective income tax rate of 32%, rising from 26% a year earlier.

Balance Sheet

Cash and equivalents totaled $6.8 billion as of September 30, increasing 17% from a year earlier. Total shareholders' equity was $7.7 billion, increasing from $7.6 billion in September 2009. The company repurchased 1.7 million shares for $172 million during the fiscal fourth quarter.

Stock Ratios

Shares trade for 15 times the consensus earnings estimate of $7.75 for fiscal 2011.

Analyst Ratings

Out of 20 analysts covering Franklin Resources, 12 rate the shares a buy, while the other eight recommend investors hold the shares.

3. Stifel Financial

Company Profile

Stifel Financial ( SF) of St. Louis, Mo. operates as brokerage and investment bank through its Stifel, Nicolaus & Co. and Thomas Weisel Partners subsidiaries, and also offers consumer and commercial loans through Stifel Bank & Trust. The shares closed at $46.61 Tuesday, down 15% over the previous year.

Stifel expanded its investment banking business by merging with Thomas Weisel Partners Group in July. In August, Thomas Weisel was elected co-chairman of the merged company's board of directors.

Income Statement

For the second quarter - before the merger was completed - Stifel reported net income of $21.1 million, or 60 cents a share, increasing from $15.8 million, or 51 cents a share, during the second quarter of 2009. Net revenues for the second quarter increased 25% from a year earlier to $328 million, as market activity increased.

The company is scheduled to report its third quarter financial results on November 9.

Balance Sheet

Stifel Financial had $3.4 billion in total assets as of June 30. Portfolio loans totaled $368 million. Loan losses and nonperforming loans were minimal. Stifel Financial is technically a bank holding company, regulatory capital guidelines set by the Federal Reserve. As of June 30, the company's ratio of Tier 1 leverage ratio was a very strong 26.2%.

Stock Ratios

The shares trade for 12.6 times the consensus earnings estimate of $3.70 for 2011.

Analyst Ratings

Out of six analysts covering Stifel Financial, five rate the shares a buy and one analyst recommends investors sell the shares.

2. BlackRock

Company Profile

BlackRock ( BLK) is an investment manager serving institutional clients, individual investors and managing accounts for pension plans, mutual funds, banks and other entities. The company is headquartered in New York and is 34%-owned by Bank of America ( BAC).

Shares closed at $168.62 Tuesday, down 32% from a year earlier. Based on a quarterly payout of a dollar, the shares have a dividend yield of 2.37%.

Income Statement

For the third quarter, BlackRock reported net income of $551 million, or $2.83 a share, increasing from $317 million, or $2.27 a share during the third quarter of 2009. Total revenue increased 84% year-over-year, to $2.1 billion. Total assets under management were $3.4 billion as of September 30, up 140% from a year earlier, reflecting the acquisition of Barclays Global Investors in December 2009, as well as new business.

Keefe, Bruyette & Woods analyst Robert Lee termed BlackRock's performance "solid and generally in-line," and increased his full-year earnings estimate for 2010 to $10.38 a share, while lowering his 2011 earnings estimate slightly, to $11.45 a share. Lee's 12-month price target for BlackRock was unchanged, at $200.

Balance Sheet

BlackRock didn't provide a balance sheet with its third-quarter earnings release.

The company repurchased roughly 895 thousand shares during the third quarter, out of an authorized 5.1 million, to "to neutralize the dilutive effects of restricted stock units and options."

Stock Ratios

Shares trade for 14.8 times the consensus earnings estimate of $11.38 a share for 2011, among analysts polled by Thomson Reuters.

Analyst Ratings

Out of 13 analysts covering BlackRock, 10 rate the shares a buy and three recommend investors hold the shares. The median price target among the analysts is $198, implying 17% upside.

1. Goldman Sachs

Company Profile

Shares of Goldman Sachs ( GS) closed at $158.29 Tuesday, climbing 18% over the previous year. Among this group of 12 U.S. stocks in the Capital Markets industry group rated a "Buy" by TheStreet Ratings, Goldman has the highest upside potential of 18%, based on the median price target of $187.50 among analysts polled by Thomson Reuters.

Income Statement

Net income for the third quarter was $1.9 billion, or $2.98 a share, declining from $3 billion, or $5.25 a share, a year earlier. Total revenue was $8.9 billion, declining from $12.4 billion during the third quarter of 2009, when the company booked much higher trading revenue.

Investment banking revenue increased 24% year-over-year to $1.1 billion during the third quarter, and the company said it ranked "first in worldwide announced and completed mergers and acquisitions and common stock offerings for the year-to-date."

Following Goldman's earnings release, Richard Staite of Atlantic Equities raised his 2011 earnings estimate to $15.35 a share from $14.67, adding that the "sharp decline in customer trading activity" resulted in a return on tangible equity of 11% in the third quarter, far shy of the company's goal of 20% over the long term. Staite said his firm expected trading activity to be "subdued for at least the next six months," and maintained his "Overweight" or buy rating on the shares, with a $170 price target.

Balance Sheet

Total assets were $909 billion as of September 30. The Tier 1 capital ratio was a strong 15.7% and its ratio of tangible common equity to risk-weighted assets was 14.2%.

Warren Buffett's Berkshire Hathaway ( BRK.A) still holds $5 billion in preferred shares of Goldman Sachs, with a 10% coupon. Berkshire also has warrants to buy up to 43.5 Goldman shares at a price of about $115.

Stock Ratios

The shares trade for 10.5 times the consensus earnings estimate of $17.93 for 2011, among analysts polled by Thomson Reuters.

Analyst Ratings

Sentiment for Goldman is strong, with 18 out of 20 analysts covering the company rating its shares a buy. The other two analysts recommend investors hold the shares.

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-- Written by Philip van Doorn in Jupiter, Fla.

>To contact the writer of this article, click here: Philip van Doorn.

>To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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