Drip Portfolio Report
Thursday, October 16, 1997
by Randy Befumo (TMF
[email protected])
ALEXANDRIA, VA (Oct. 16, 1997) -- Yesterday, you had your second homework assignment with the Drip Portfolio. After giving you all of the necessary data to figure out the valuations of FRANKLIN TEMPLETON (NYSE: BEN), T. ROWE PRICE (Nasdaq: TROW), LIBERTY FINANCIAL (NYSE: L) and EATON VANCE (NYSE: EV), you were left to do your homework and figure them out. Did you? Good for you. Although it might seem nice at times to crib from the ol' Drip Portfolio, ultimately your investments will be most satisfying and profitable if you do all the work behind them. First, let's recap the numbers (AOL users, please maximize the window):
AUM Op. Earnings Rev's Shares Cash Debt BEN $208.8b $572.9m $1,896.1m 126.1m $323.3m $521.5m EV $21.0b $60.6m $197.2m 19.3m $130.5m $53.1m KSU $71.3b $142.3m $330.1m X X X L $36.2b $170.5m $1,156.2m 29.4m $13.3m $0 TROW $116.9b $234.2m $647.2m 58.1m $134.3m $0
Now, let's check those answers:
o Franklin Resources, or Franklin/Templeton, has
126.1 million shares outstanding, $323.3 million
in cash and short-term investments and $521.5
million in long-term debt. At a recent $93 3/8 a
share, this means that the enterprise value of the
company is $11,972.8 million. The company
trades at 5.73% of assets under management,
20.9 times operating earnings and 6.3 times sales.
o Eaton Vance has 19.3 million shares outstanding,
$130.5 million in cash and short-term investments
and $53.1 million in long-term debt. At $36 a share,
this means that the enterprise value of the company
is $617.4 million. The company trades at 2.94%
of assets under management, 10.2 times operating
earnings and 3.1 times sales.
o Liberty Financial has 29.4 million shares outstanding,
$13.3 million in cash and short-term investments
and no long-term debt. At a recent $54 1/4 a share,
this means that the enterprise value of the company
is $1,595.0 million. The company trades at 4.4%
of assets under management, 10.7 times operating
earnings and 1.4 times sales.
o T. Rowe Price has 58.1 million shares outstanding,
$134.3 million in cash and short-term investments
and no long-term debt. At a recent $69 1/8 a share,
this means that the enterprise value of the company
is $3,881.9 million. The company trades at 3.32%
of assets under management, 16.6 times operating
earnings and 6.0 times sales.
o How about that extra credit question? American
Century, which we mentioned two days ago,
should fit it here as well. It turns out that when
American Century was at $60 billion in assets
under management, JP MORGAN (NYSE: JPM)
paid $900 million for 45%. This valued all of
American Century at $2 billion. The ratio of
market value to AUM is $2 billion divided by
$60 billion, or 3.3% -- right in line with our numbers.
Now, tune in tomorrow when we take all of these numbers, average them and come up with a fair price for Kansas City Southern's Financial Asset Management business!
HOMEWORK: For those of you who want to work ahead, all you need to do is exactly what we did last week when we put a fair price on Kansas City Southern Railroad (KCSR). Come up with a low and a middling valuation based on all three criteria and value FAM.
EXTRA CREDIT: Keep in mind that since Kansas City Southern only owns 83% of Janus and 87% of Berger Associates, what number should you really use for the assets under management? Janus has $67.3 billion in AUM and Berger Associates has $4.0 billion in AUM.
TODAY'S NUMBERS
Stock Close Change
Intel $85 3/8 -1 5/16
Day Month Year History
Drip: +0.00% 0.00% 0.00% 0.00%
S&P: +0.00% 0.00% 0.00% 0.00%
NASDAQ: +0.00% 0.00% 0.00% 0.00%
Rec'd # Security In At
9/8/97 1 Intel $94.69
Base: $700.00
Expenses: $ 55.50 (Moneypaper)
Purchases: See above
Cash: $549.10
Total Value: $652.00 apprx.
The portfolio began with $500 on July 28, 1997, adds $100 on the 15th of every month, and the goal is to have $150,000 by August of the year 2017.
