If Wall Street were the NBA, I'd liken Principal Financial Group
Principal Financial Group is a financial-services company specializing in the retirement market -- think 401(k)s, or health and life insurance. It sports an in-house asset management team, and it recently bought Washington Mutual's
Principal's asset-management division's excellent performance has also earned high Morningstar ratings, and has helped it add $1 billion a month to assets under management. Principal also noted that it has a 54% retention rate of assets when an employee of a firm it serves leaves that company; typically, such funds are very hard to retain.
Principal's prime strengths are its steady earnings and strong competitive position. When a business selects a provider like Principal to do its 401(k)s, employee stock options, and other services, it will probably stick with that provider for awhile, given the headaches involved in setting up such a complex administration plan. (Speaking from experience, just thinking about such efforts makes me frustrated.)
Principal's one-stop-shopping aspect also contributes to its moat. Only a handful of competitors can provide its wide variety of services in-house, including asset management, defined-benefit plans, defined-contribution plans, employee stock options, and non-qualified plans. Principal benefits from offering such comprehensive services because its customers only have to deal with one provider, and their employees can consolidate their statements. Principal also has a national network of distributors to provide a local presence; that's an extremely critical asset for financial service companies, where products are often sold based on personal relationships. All in all, I think investors who favor unexciting but successful companies will like Principal Financial Group. More importantly, this company's shareholder returns, at an annualized average of 20% over the past five years, are very exciting indeed.
Principal Financial Group has earned a five-star rating in Motley Fool CAPS. Give CAPS a try to see our community's ratings on more than 4,000 stocks.
Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates your comments, concerns, and complaints. The Motley Fool has a disclosure policy.