Tuesday, August 20, 2013

Franklin Resources (BEN) 2013 Review

Franklin Resources is a financial services holding company which provides investment management, trust and stock transfer services, distributes hundreds of mutual funds worldwide and sells insurance products, tax shelter investments and closed end funds to a wide variety of commercial, industrial, institutional and governmental organizations.  The company has grown its dividend and profits at a 14-15% pace over the last 10 years while earning a 15%+ return on equity.  BEN experienced profit difficulties in 2009 but earnings rebounded and should continue to increase as a result of;

(1)  an ongoing aggressive cost cutting program,

(2) its breadth and innovative product offerings provide a competitive advantage,

(3) international expansion,

(4) a stock buyback program,

(5) expand its strategic product offerings via acquisition [recent acquisitions---Pelagos Capital Management and K2Advisors].


(1) its business is subject to numerous overlapping  and changing rules, regulations and legal interpretations,

(2) exchange rate risk,

(3) an increasingly competitive industry,

(4) rising operating expenses.

BEN is rated A++ by Value Line, has an 11% debt to equity ratio and its stock yields 0.8%.

  Statistical Summary

                 Stock     Dividend         Payout      # Increases  
                Yield      Growth Rate     Ratio       Since 2003

BEN           0.8%          8%              11%              10
Ind Ave      2.1             12                20                NA 

                Debt/                        EPS Down       Net        Value Line
                Equity         ROE      Since 2003     Margin       Rating

BEN          11%           22%             2                42%           A++
Ind Ave      36             18              NA               17             NA


            Note: BEN stock made good progress off its March 2009 low, surpassing the downtrend off its October 2007 high (red line) and the November 2008 trading high (green line).  Long term, the stock is in an uptrend (straight blue lines).  Intermediate term, BEN is challenging its intermediate term uptrend (purple lines).  The wiggly blue line is on balance volume.  The Aggressive Growth Portfolio owns a 75% position in BEN.  The upper boundary of its Buy Value Range is $18.  The lower boundary of its Sell Half Range is $58.


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