Monday, August 13, 2012

Janus Rises

Just 9 months ago, Janus was discussed on this site as a potential value investment. Last week, investors were offered the opportunity to sell the company following a gain of 47% from its November 2011 price. As such, Janus becomes the latest company to move from the Stock Ideas page to the Value In Action page.

The last 10% gain came on Friday of last week as the company announced new business from a Japanese insurance firm that is also going to buy a bunch of Janus' shares.

Sentiment likely played a big role in the availability of this opportunity last fall. Here was a debt-free company trading at a P/FCF of 7 in an industry (money-management) with relatively sticky customers. The company has a solid operating history despite some major financial shocks in the last decade that have roiled markets (tech bubble and burst, September 11th attacks, panic in 2008/2009).

But short-term negativity was rampant. As the company's assets under management figure was falling, shareholders of Janus ran for the exits. The entire market was also down late last year, and since Janus is paid in part by performance fees, this was another reason for short-termers to flee. Finally, for some reason the media picked up on the notion (and subsequently ran with that notion) that the money-management business was soon-to-be dead.

When sentiment is at its poorest, it is often the best time to buy a stock (assuming the poor sentiment cannot affect the underlying business, which isn't always the case). Disclosure: No position

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