Legg Mason (LM) Is Today's Storm The Castle Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Legg Mason ( LM) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Legg Mason as such a stock due to the following factors:

  • LM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $63.9 million.
  • LM has traded 277,311 shares today.
  • LM is trading at 2.53 times the normal volume for the stock at this time of day.
  • LM crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on LM:

Legg Mason, Inc. is a publicly owned asset management holding company. The firm provides investment management and related services to institutional and individual clients, company-sponsored mutual funds and other pooled investment vehicles through its wholly owned subsidiaries. The stock currently has a dividend yield of 1.5%. LM has a PE ratio of 26. Currently there are 6 analysts that rate Legg Mason a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Legg Mason has been 942,200 shares per day over the past 30 days. Legg Mason has a market cap of $5.9 billion and is part of the financial sector and financial services industry. The stock has a beta of 1.54 and a short float of 6.4% with 4.86 days to cover. Shares are down 1.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Legg Mason as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, good cash flow from operations, increase in stock price during the past year and growth in earnings per share. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Capital Markets industry average. The net income increased by 20.3% when compared to the same quarter one year prior, going from $68.95 million to $82.96 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 3.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • LEGG MASON INC has improved earnings per share by 25.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LEGG MASON INC reported lower earnings of $2.05 versus $2.33 in the prior year. This year, the market expects an improvement in earnings ($3.35 versus $2.05).
  • Net operating cash flow has significantly increased by 53.37% to $187.07 million when compared to the same quarter last year. Despite an increase in cash flow of 53.37%, LEGG MASON INC is still growing at a significantly lower rate than the industry average of 191.13%.

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