Calamos Asset Management, Inc (CLMS): Can This Financial Firm Rebound?

It is also a positive sign that management believes it can turn fund performance and the firm around.  In addition to insider buying, the Board approved a 3 million share repurchase program – there are 22.8 million shares outstanding – which is again a significant number.  Management also increased the quarterly dividend to $0.11 from $0.125, and the dividend yield to 4.3%, despite its performance.

Share Performance vs. Competitors

Calamos Asset Management, Inc (NASDAQ:CLMS) shares are down 11% from a year ago, but year to date they are up 8.3%.  Even with their shares being up in 2013, Calamos has significantly underperformed in comparison to other asset managers like BlackRock, Inc. (NYSE:BLK) , up 22.4% YTD, and Affiliated Managers Group, Inc. (NYSE:AMG) , up 22.4% YTD.  The difference is the assets under management increases at BlackRock and AMG versus Calamos.  Due to the increases in AUM, Blackrock has increased its revenue by 14% and AMG has increased its revenue by 22%.  The resulting earnings growth has been phenomenal.  Blackrock’s quarterly earnings are up 24%, while AMG’s are up 86%.  Even with this growth Blackrock and AMG have PE ratios of around 14.  Janus’ (JNS) shares are also up 8.4% YTD.  Its funds have also underperformed versus benchmarks, though not to the degree of Calamos’ funds, which has also resulted in outflows.

Conclusion

On March 13, Calamos was downgraded to Sell by Goldman Sachs.  Asset outflows, fund underperformance, and a relatively expensive valuation compared to recent and forecasted growth all present challenges for Calamos.  In the near-term, it is likely to underperform peers as there is no quick fix to start growing assets again at the fund given a poor track record in too many large funds.  While the repurchase program, an increased dividend, and insider buying seem positive, it is likely what is supporting and driving the shares up given the company very weak fundamentals.   If this dries up or scales back and performance at its funds do not improve, the shares could again start to decline.

The article Can This Financial Firm Rebound? originally appeared on Fool.com is written by Mike Thiessen.

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