Archive for the ‘Investment Ideas’ Category

Hedge Fund Pershing Square’s 1st Quarter 2012 Letter (Bill Ackman)

Monday, June 25th, 2012

Bill Ackman, legendary activist investor recently published its 1st quarter investment letter. The fund has performed strongly to date, with 9.3% returns and has large holdings in Canadian Pacific, General Growth Properties, Citigroup, and J.C. Penney. If he still owns them, the latter two companies may create some trouble for his firm in the future.

In this investor letter, Ackman discusses the idea of time arbitrage, which is taking advantage of forced sellers for the benefit of long term profit. This is because stocks are often more volatile than their underlying businesses, and few firms and individuals can stomach volatility.

He also discusses that private equity portfolio companies, because of their higher implied leverage, have much more volatile returns, but unfortunately, you do not see a mark-to-market as you do in publicly traded equities.

Enjoy the letter below:


Understanding The Basic Elements of Forex Trading

Thursday, March 10th, 2011

Understanding The Basic Elements of Forex Trading

The foreign exchange market is finally beginning to garner mainstream attention.  The Bank of International Settlements estimates that the average daily volume in the fx market is around $4 trillion, which makes it by far the largest financial marketplace in the world.  Surprisingly, however, many novice investors and traders have never even heard of this market.

Until the late 1990’s, the only players allowed to execute trades in the foreign exchange market were investment banks, hedge funds, and very wealthy private investors.  Since the minimum contract size was generally $1,000,000, smaller traders were effectively denied entrance into the market.

In the late 90’s, however, this all changed.  The advance of the internet and technology led several online forex brokers to open shop and begin catering to smaller investors and traders.  This led to the birth of the retail foreign exchange market.  In this article, we are going to discuss three key elements to forex trading:  Leverage, Margin, and Equity.


The idea of leverage in the fx market has been under intense debate over the last several years.  Since the market is decentralized and worldwide, regulation was largely absent from the fx market until recently.  In 2010, the National Futures Association instituted some major changes, one of them being a cap on leverage at 50:1.  This means that an fx trader in the United States can trade on leverage at a ratio of 50:1.  Thus, if a trader has $1,000 in his account, then he is able to leverage that $1,000 into $50,000 and trade much larger positions in EUR USD.  Until the National Futures Association passed this regulation, some brokers were offering traders up to 400:1 leverage, which means that with a $1,000 account, traders were able to control a $400,000 position in the market. Note that leverage is a two-edged sword. It will increase both losses and profits.


Margin is the life of a trader.  If a trader does not have enough margin, then he cannot open a trade.  Furthermore, if a trader has an open position moving against him, he may eventually not have enough money to act as margin, which means his account would suffer a “margin call.”

Margin is the amount of money required to open a leveraged position.  For example, if Broker ABC offers 50:1 leverage, and Bob the Forex Trader wants to open a position of $100,000, then Bob has to put up $2,000 of margin.  If Bob’s trade begins to move against him to the point where his account equity becomes less than $2,000, Bob will suffer a “margin call,” which basically means that his broker will call for more margin if Bob wants to keep the position open.


Everyone knows that one of the leading causes of business failure is a lack of initial capital, and trading is no different.  If a trader opens an account with a few thousand bucks and trades heavily leveraged positions, his chances of success are nominal.

Equity is essential to trading success.  The question many new traders have is, how much money do I need to open an account?  Well, the answer to that question is different for everyone, and it largely depends on what your goals are.  If you simply want to get some trading experience, but still have a full-time job, then a person can open an account with a few thousand bucks.  However, if you are trying to generate enough capital gains to sustain a living, then the initial account balance should be much, much higher.

Leverage, Margin, and Account Equity are three essential aspects of fx trading that every trader must be familiar with.

Check out our intensive investment banking, private equity, and sales & trading courses!  The discount code Merger34299 will be activated until April 15, 2011. Feel free to e-mail thomas.r[at] with questions.

Bill Gross of PIMCO Dumps U.S. Treasuries

Thursday, March 10th, 2011

As a follow up to our story on shorting treasuries using TMV, the Direxion Daily 30+ year treasury bear, the LA team wanted to discuss Bill Gross’s move to dump government securities.  Bill Gross runs the world’s largest bond fund and has surprisingly decreased his treasury holdings completely.  His fund is now in 23% cash, the highest cash balance since 2008.  PIMCO manages $1.24 trillion of assets, mainly fixed income securities.  According to Gross, if the U.S. transitions into quantitative easing v3 (QEIII), yields on government securities will may increase 150 bps by 2012, resulting in large gains for those net short the 30 year treasury.

According to Bloomberg, “Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., eliminated government-related debt from his flagship fund last month as the U.S. projected record budget deficits.

Pimco’s $237 billion Total Return Fund last held zero government-related debt in January 2009. Gross had cut the holdings to 12 percent of assets in January, according to the company’s site. The fund’s net cash-and-equivalent position surged from 5 percent to 23 percent in February, the highest since May 2008.

Yields on Treasuries may be too low to sustain demand for government debt as the Fed approaches the end of its second round of quantitative easing, Gross wrote in a monthly investment outlook posted on Pimco’s website on March 2. Gross mentioned that Pimco may be a buyer of Treasuries if yields rise to attractive levels.

Treasury yields are about 150 basis points too low when viewed on a historical context and when compared with expected nominal gross domestic product growth of 5 percent, he wrote in the commentary. The Fed is scheduled to complete purchases of $600 billion of Treasuries in June.

Gross in his February commentary urged investors to reduce holdings of Treasuries and U.K. gilts and buy higher-returning securities such as debt from emerging-market nations. “Old- fashioned gilts and Treasury bonds may need to be ‘exorcised’ from model portfolios and replaced with more attractive alternatives both from a risk and a reward standpoint,” Gross wrote.

Emerging-Market Debt

Gross last month increased holdings of emerging-market debt to 10 percent, the highest since October, from 9 percent in January. He cut holdings of mortgage securities to 34 percent from 42 percent in January.

The Zero Hedge website first reported the change in assets today. Pimco doesn’t comment on changes in holdings.

Treasuries returned 5.9 percent in 2010, according to Bank of America Merrill Lynch Indexes. The securities lost 0.6 percent so far this year.

Ten-year Treasury yields have risen for each of the past six months, according to data compiled by Bloomberg, the longest run since June 2006, as the economy showed signs of improvement and prices of commodities climbed. The 10-year yield fell six basis points to 3.48 percent today.

Gross kept the holdings of non-U.S. developed debt at 5 percent in February.

Inflation Outlook

Gross’ fund has returned 7.23 percent in the past year, beating 85 percent of its peers, according to data compiled by Bloomberg. It gained 1.39 percent over the past month.

As the Fed maintains its target rate at a record low range of zero to 0.25 percent and has made an increase in inflation a cornerstone of its monetary policy, Gross noted that inflation may be a bigger factor than many suggest.

Gains in so-called headline inflation matter more for the U.S. than Fed Chairman Bernanke suggests and rising oil prices may cut U.S. gross domestic product by a quarter to half a percentage point, Gross said March 4 in a radio interview on “Bloomberg Surveillance” with Tom Keene.

“Bernanke tends to think this doesn’t matter — at least in terms of headline versus the core — we do,” Gross said.

Pimco’s U.S. government-related debt category can include conventional and inflation-linked Treasuries, agency debt, interest-rate derivatives, Treasury futures and options and bank debt backed by the Federal Deposit Insurance Corp., according to the company’s website. The fund can have a so-called negative position by using derivatives, futures or by shorting.

Derivatives are financial obligations whose value is derived from an underlying asset. Futures are agreements to buy or sell assets at a later specific price and date. Shorting is borrowing and selling an asset in anticipation of making a profit by buying it back after its price has fallen.

Pimco, a unit of the Munich-based insurer Allianz, managed $1.24 trillion of assets as of December.”

Check out our intensive investment banking, private equity, and sales & trading courses! The discount code Merger34299 will be activated until April 15, 2011. Questions? Feel free to e-mail thomas.r[at] with your inquiries or call our corporate line.

Wing Chau Sues Author of the Big Short!

Tuesday, March 1st, 2011

People have no SHAME.  Wing Chau, president of Harding Advisory is suing Michael Lewis, the author of The Big Short for “unfairly casting him as a villain.”  Listen Wing, you cheated investors and blatantly ignored your fiduciary responsibility.  Give it a break.

In his book, Lewis writes about a handful of Wall Street outsiders who realized the subprime mortgage business was a house of cards and found a way to bet against it, making billions for themselves.  He also discusses the perpetrators and poor underwriters that were the cause of the subprime collapse:

“Author Michael Lewis was sued by Wing Chau, president and principal of Harding Advisory LLC, who accused the writer of defaming him in his 2010 book “The Big Short: Inside the Doomsday Machine.”

Chau, a manager of collateralized debt obligations, according to a complaint filed Feb. 25 in NY federal court, claims the book unfairly casts him as one of the “villains” responsible for the 2008 financial collapse.

The book “depicts Mr. Chau as someone who ignored his professional responsibilities, made misrepresentations to investors, charged money for work that was not performed, had no stake in the CDOs he managed, was incompetent or reckless in carrying out his responsibilities, and violated his fiduciary duties by putting the interests of ‘Wall Street bond trading desks’ above those of his investors,” according to the complaint.

Also named in the suit, which seeks unspecified damages, are the book’s publisher, W.W. Norton and Steven Eisman, managing director of FrontPoint Partners LLC, whom Chau describes in the complaint as “one of the principal sources Lewis relied on in writing ‘The Big Short.’”

Lewis, a columnist for Bloomberg News, didn’t immediately respond to an e-mail seeking comment on the suit. Norton spokeswoman Elizabeth Riley had no immediate comment

The case is Chau v. Lewis, 11-cv-1333, U.S. District Court, Southern District of (Manhattan).”

To contact the reporter on this story: Bob Van Voris in New York.

Complaint Against Michael Lewis

Greenstone Value Opportunity Fund, LP 2010 Annual Letter (Distressed, Deep Value Fund)

Friday, February 25th, 2011

After closing three strong years of performance (2008 – 2.5%, 2009 – 36.5%, 2010 – 15.6%), Greenstone shares its outlook for 2011, as the year of “dividend chasing.”  2010 was certainly a year of “credit chasing,” where all funds searched for yield in high yield bonds, leveraged loans, and REITs.  About 80% of the Greenstone portfolio is investing in traditional deep value securities, and 20% is invested in “special situations.”  The last bullet point in Greenstone’s themes is that historically, “economies with the highest growth produce the lowest stock returns by an immense margin (yes, you read that right). In fact, stocks in countries with the highest economic growth have earned an annual average return of 6%; those in the slowest-growing nations have gained an average of 12% annually (source: Credit Suisse Global Returns Yearbook). This could be especially true in 2011, where equity investors in emerging markets are fighting policymakers.”

Here are Greenstone’s selected themes for 2011:

• We still like equities, particularly in the U.S. While they currently seem short-term overbought, and a technical correction is possible, we still see the most value in this area, especially when we consider the alternatives.

• In reviewing our letters from early last year, we talked about 2010 being the “Year of the Yield Chaser” in the credit space. We cut the majority of our credit exposure in Q1 and Q2 of 2010 because of what we thought was limited further upside appreciation potential. We can see 2011 being the “Year of the Dividend Chaser”.
• Offshore deepwater drilling is the last bastion for hydrocarbon discovery. We think a lot of “first time” emerging market demand characteristics and higher oil prices will lead to increased deepwater programs by the IOCs and NOCs. We have a handful of positions that give us exposure to this area.
• We would consider shorting natural gas companies because of the supply/demand dynamics and high valuations. We could see a scenario where the contrarian call is to go long physical natural gas because 1) it’s unloved and 2) the historical ratio between gas and oil prices is creating the perception that gas might be a buy. However, even with increasing demand for natural gas expected in the U.S. this year, we still have a tremendous overabundance of supply. We’re keeping an eye on high multiple natural gas companies and MLP’s that derive a generous amount of “other income” from hedging programs that are set to roll off.
• The M&A space is one that, for various reasons, we see doing well going forward. This primarily derives from the cash reserves on S&P 500 company balance sheets, which are at the highest level in ten years (currently over $1.2 trillion). This is almost 50% more than the $825 billion held in cash in September 2008. Information technology is the leading sector with cash reserves. With a near 0% interest rate environment, how long can companies hold so much cash? VC’s and Private Equity have not had a genuine chance to monetize their portfolios for 2-3 years now, and we believe they will search out the cash rich/public company exit option. We currently have 5+ names in the portfolio that we believe could benefit from such a trend.
• This year could finally be the year where companies have the ability to pass through their increased input costs to consumers. This would result in inflation showing up in the U.S., despite what the CPI is saying.
• Along with middle of the road valuations, allocation shifts could be a boom for the equity market in 2011. It is interesting to hear people like Byron Wein say that “Institutional portfolios have to have more of their money invested in places like China, India, and Latin America,” essentially saying that developing countries are generating a majority of the world’s growth, and institutional portfolios should have exposure to these markets. Mr. Wein recommends large conventional institutions substantially increase their allocations to hedge funds and emerging markets.
• European and municipal debt issues will once again provide buying opportunities when the markets turns south on these worries. With municipal budgets due in early June, expect more movement in and around this time frame. We have taken advantage of market gyrations that these events have previously offered, and would look to do so again.
• The dramatic equity rally from the lows at the end of June occurred almost entirely with net outflows from domestic equity funds, and net inflows into domestic fixed income funds. Late in the fourth quarter, this dynamic switched for the first time in a long while, with inflows into equities and outflows from bond funds. If this trend continues, which it appears that it might, even more fuel could be added to the recent stock market rally.
• Even in light of the money flows just mentioned, we don’t expect John Q. Public will come charging back into the market any time soon. We are wary, however, about the potential shift of pensions and endowments (who manage John Q. Public’s money) into equity markets. Essentially, there are way too many underperforming endowments (relative to their liabilities), and they may be forced to chase returns in order to meet their obligations.
• In contrast to the Byron Wein bullet point above, Elroy Dimson of the London Business School has decades of compelling data from 50+ countries to support the view that high economic growth in emerging markets doesn’t ensure high stock returns. His book, ‘Triumph of the Optimists: 101 Years of Global Investment Returns’, along with several other studies, have underlying evidence that economies with the highest growth produce the lowest stock returns by an immense margin (yes, you read that right). In fact, stocks in countries with the highest economic growth have earned an annual average return of 6%; those in the slowest-growing nations have gained an average of 12% annually (source: Credit Suisse Global Returns Yearbook). This could be especially true in 2011, where equity investors in emerging markets are fighting policymakers (who are trying to cool off overheated economies with monetary policy, etc), while developed markets are receiving tailwinds from policymakers (who are aggressively trying to lift the prices for risk assets). While many are clamoring for additional exposure to emerging markets, we believe the best risk/reward is to continue to find value in developed markets like the United States.

December 2010 (1) Letter from Distressed Debt Investing Blog

Top 50 Small Cap Stocks (Bank Target Price vs. Current Price) – 2.24.11

Thursday, February 24th, 2011

Ranking  |  Company (Ticker)  |  Potential Upside
1 Progress Software Corporation (NASDAQ:PRGS) 984.0%
2 Media General, Inc. (NYSE:MEG) 493.7%
3 Alexza Pharmaceuticals, Inc. (NASDAQ:ALXA) 347.8%
4 MELA Sciences, Inc. (NASDAQ:MELA) 317.5%
5 Cytokinetics, Inc. (NASDAQ:CYTK) 311.2%
6 Celldex Therapeutics, Inc. (NASDAQ:CLDX) 269.6%
7 Peregrine Pharmaceuticals (NASDAQ:PPHM) 241.5%
8 The Princeton Review, Inc (NASDAQ:REVU) 240.1%
9 Somaxon Pharmaceuticals, Inc. (NASDAQ:SOMX) 222.2%
10 AVANIR Pharmaceuticals (NASDAQ:AVNR) 215.8%
11 Neostem Inc. (AMEX:NBS) 214.7%
12 LECG Corporation (NASDAQ:XPRT) 209.2%
13 Enzo Biochem, Inc. (NYSE:ENZ) 205.0%
14 NeurogesX, Inc (NASDAQ:NGSX) 194.1%
15 Microvision, Inc. (NASDAQ:MVIS) 177.8%
16 Novavax, Inc. (NASDAQ:NVAX) 168.7%
17 Rodman & Renshaw Capital Group Inc. (NASDAQ:RODM) 166.7%
18 Vical Incorporated (NASDAQ:VICL) 164.6%
19 American Apparel Inc. (AMEX:APP) 163.2%
20 CytRx Corporation (NASDAQ:CYTR) 158.0%
21 PURE Bioscience (NASDAQ:PURE) 155.5%
22 Zogenix, Inc. (NASDAQ:ZGNX) 148.0%
23 Ligand Pharmaceuticals Inc. (NASDAQ:LGND) 148.0%
24 BioSante Pharmaceuticals, Inc. (NASDAQ:BPAX) 145.2%
25 Inhibitex, Inc. (NASDAQ:INHX) 135.0%
26 Broadwind Energy Inc. (NASDAQ:BWEN) 132.2%
27 MannKind Corporation (NASDAQ:MNKD) 127.8%
28 L&L Energy, Inc. (NASDAQ:LLEN) 127.0%
29 Inovio Pharmaceuticals, Inc. (AMEX:INO) 125.2%
30 Nymox Pharmaceutical Corporation (NASDAQ:NYMX) 120.0%
31 Dyax Corp. (NASDAQ:DYAX) 118.0%
32 Omeros Corporation (NASDAQ:OMER) 117.2%
33 Pharmacyclics, Inc. (NASDAQ:PCYC) 115.6%
34 Allos Therapeutics, Inc. (NASDAQ:ALTH) 115.2%
35 Keryx Biopharmaceuticals (NASDAQ:KERX) 112.3%
36 CKX Inc. (NASDAQ:CKXE) 110.0%
37 FuelCell Energy, Inc. (NASDAQ:FCEL) 108.3%
38 Array BioPharma Inc. (NASDAQ:ARRY) 106.6%
39 Value Line, Inc. (NASDAQ:VALU) 106.5%
40 Corp. (NASDAQ:LOCM) 105.4%
41 Geron Corporation (NASDAQ:GERN) 102.4%
42 Cenveo, Inc. (NYSE:CVO) 102.1%
43 Neuralstem, Inc. (AMEX:CUR) 102.0%
44 Rochester Medical Corporation (NASDAQ:ROCM) 100.1%
45 Chelsea Therapeutics International Ltd. (NASDAQ:CHTP) 99.1%
46 EXACT Sciences Corporation (NASDAQ:EXAS) 97.3%
47 Dynavax Technologies Corporation (NASDAQ:DVAX) 94.8%
48 Cornerstone Therapeutics, Inc. (NASDAQ:CRTX) 93.4%
49 Aoxing Pharmaceutical Company, Inc. (AMEX:AXN) 91.4%
50 Biodel Inc (NASDAQ:BIOD) 91.3%

Pershing Square Capital Q12010 Investor Letter

Saturday, July 3rd, 2010

In the latest hedge fund letter, portfolio manager William Ackman goes over his positions in General Growth Properties, Borders, Sears Canada, Craft, Citigroup, and Alliansce.  At the time the letter was written, Citigroup made up 9% of the fund’s holdings with the following rationale:

“We recently acquired 146.5 million shares of Citigroup, representing approximately 9% of fund capital. We believe that recent events surrounding the financial reform bill, alleged fraud at Goldman Sachs, the overhang of the sale of the U.S. government’s 27% stake in Citi, and distress in Europe have created a compelling opportunity to purchase Citi shares at a meaningful discount to their fair value.”

Pershing Q1 2010 Investor Letter

Ninety-Three Page Bullish Outlook Report on S&P500 – Goldman Sachs

Thursday, June 3rd, 2010

Goldman Sach’s recently issued a bullish outlook for the industry, with overweight ratings on technology, energy, and basic material stocks.  Especially after the beating energy shares have taken over the past five weeks, the time may be right to buy.  This link was provided by ZeroHedge.

The report highlights GS’s investment process and ranking methodology.

Monthly Chartbook

Investment Idea #2: Micron Technology, Inc. (Buy, Target $13.50)

Friday, February 26th, 2010



Micron will continue to outperform as global business investment increases in the 1st & 2nd quarters.  There is a lack of capacity in the market, and as a result margins will continue to be resilient in the medium term.  Production and capital expenditures will continue to rise as companies foresee a rise in stimulus driven consumption.  The Chicago Fed recently released leading indicators for the month of January, and manufacturing is certainly leading.  Despite the recession, computer shipments have been rising globally.  DRAM has been in under-supply.

Together, Micron and Samsung have almost 50% of the memory market for NAND, DRAM, and NOR.  This gives them pricing power, which will benefit them as players in the semiconductor industry.  Samsung has about 30% of the market, which post-acquisition Micron has about 20%.


The acquisition of Numonyx will almost immediately add income to Micron’s bottom line due to cross selling opportunities with Numonyx’s clients and the fact that Numonyx’s equipment is fully depreciated, so moving operations to its facilities will be more profitable.  Although Numonyx’s revenue growth is not as high as Micron’s, it will contribute more to earnings than most think.  There may be risks in the future however of having to replace this equipment, but it is certainly not a short to medium term risk.

Numonyx, formerly a private company, will contribute 30% to Micron’s sales.  Numonyx focuses on the NOR Flash memory area, which is not growing rapidly, but will provide cash flow.  Gross margins are fairly similar across both companies.

Micron purchased Numonyx for 1.27 billion in stock at sales multiple of about 0.6x, which is relatively cheap.  The company also had no debt load.


Micron’s management expects between 30 and 50% revenue growth over the previous year.


Micron’s cost structure is much leaner than its competitors and R&D as a % of Sales has fallen from 14% to 7% from 2007 to 2010. Sales, General & Administrative Expenses have fallen from 7% to 5% over the same period, and EBIT is expected to be 10% this year, as compared to -35% last year due to pricing pressures.


Cash flow from operations is expected to increase 25%+ from 2010, however total leverage is expected to stay the same.  The company will have to reinvest its extra cash into operations and is scalable enough to start new businesses in the memory space.


Total debt to capitalization is projected to fall from 36% in 2009 to 25% in 2010.


Micron is active in the intensely competitive DRAM and NAND Flash memory markets which could be adversely affected if demand suddenly drops.  Pricing and volume characteristics of the industry are highly dependent on business investment.


Micron Technology, Inc. is a global manufacturer and marketer of semiconductor devices, principally dynamic random access memory (DRAM) and Nandi Flash memory (NAND). In addition, the Company manufactures complementary metal-oxide semiconductor (CMOS) image sensor products under a wafer foundry arrangement. The Company operates in two segments, Memory and Imaging. The Memory segment’s primary products are DRAM and NAND Flash, which are memory components used in an array of electronic applications, including personal computers, workstations, network servers, mobile phones, Flash memory cards, universal serial bus (USB) storage devices, moving picture experts group layer-3 audio (MP3/4) players and other consumer electronics products. On July 10, 2009, the Company sold a 65% interest in Aptina Imaging Corporation (Aptina) to Riverwood Capital and TPG Capital.


SanDisk Corporation (NASDAQ:SNDK) is engaged in designing, developing and manufacturing products and solutions in a range of form factors using the flash memory, controller and firmware technologies.

Intel Corporation (NASDAQ:INTC) is a semiconductor chip maker, developing advanced integrated digital technology products, primarily integrated circuits, for industries, such as computing and communications.

Advanced Micro Devices, Inc. is a global semiconductor company that designs and sells microprocessors, chipsets and graphics processors.

NVIDIA Corporation (NASDAQ:NVDA) is a provider of visual computing technologies and the inventor of the graphic processing unit (GPU), a processor, which generates graphics on workstations, personal computers, game consoles and mobile devices.

Broadcom Corporation (NASDAQ:BRCM) is a provider of semiconductors for wired and wireless communications. Broadcom provides a portfolio of system-on-a-chip (SoC) solutions to manufacturers of computing and networking equipment and, broadband access products and mobile devices


The LA team feels that a $13.50 target is appropriate for Micron, which provides 48% upside to yesterday’s close.  The valuation is at about 1.5x projected FY2010 sales, which is 25% below the company’s eight year average sales multiple.  The valuation is also at about 12x projected earnings.

Investment Idea #1: Invesco (BUY, Target $25)

Wednesday, February 24th, 2010



Invesco recently bought Morgan Stanley’s retail fund operations, improving its retail distribution, product mix, and reach.  These funds include the popular Van Kampen funds.  There will be many revenue synergy opportunities to maximize the distribution of equity value and municipal bond funds to investors.  More than 60% of the M&A transaction was done using equity, so Invesco certainly has capital to shore up its balance sheet.

As equities continue to firm and perhaps rally, Invesco’s AUM should also go higher, driving up fee revenue.  Post acquisition, Invesco’s AUM should increase from $420 billion to $520+ billion.


Over 80% of Invesco’s funds perform in the top half of their Lipper (mutual fund rating) categories.  It also owns the popular PowerShares India Fund, AIM Mid Cap Core Equity Fund, and AIM Intl Growth Funds.


With respect to its capital structure, Invesco does not have debt (like other money managers).  It did not have and money market risk (like Legg Mason) did in 2008 and also paid off $300mm in debt last year.  Its total debt to cash ratio is less than 15% and its DEBT/EBITDA ratio has fallen below 0.9x.


  1. Range 19.13 – 19.63
  2. 52 week 9.33 – 24.07
  3. Open 19.17
  4. Vol / Avg. 4.16M/4.72M
  5. Mkt cap 8.38B
  6. P/E 26.04
  7. Div/yield 0.10/2.10
  8. EPS 0.75
  9. Shares 428.78M
  10. Beta     -
  11. Inst. own 86%


The LA team has a price target of about $25 on the stock, and the team also expects the company to increase its dividends.

Below is a breakdown of INVESCO’s competitors and their mutual fund assets.  Invesco grew 15% in January, while the industry average growth was less than 5%.

Mutual Fund Assets (not AUM)
Legg Mason 189.8
T. Rowe Price 227.7
BlackRock 721.4
Eaton Vance 86.2
Industry 11,000.0