Legg Mason seems to be in those awkward teenage years after a growth spurt.
In fact, it?s still in a transition period as a whole, Morningstar Equity Analyst Jeffrey Ptak said.
“They?re in the process of digesting the largest acquisition they?ve ever made, but have very promising prospects,” Ptak said.
When Legg Mason went through with the deal, it gave up its brokerage for Citigroup?s asset management unit, enabling the company to sell products to a much wider range of constituents.
A little refresher of the details: On Dec. 1, 2005, Legg Mason completed its acquisition of Citigroup?s worldwide asset management business in exchange for Legg Mason?s private clients brokerage and capital markets businesses, 5.4 million shares of common stock and $500 million in cash ? making Legg Mason solely a business asset management company.
Looking for proof Legg Mason will make it out of the woods?
“The most tangible thing to look for is revenue growth,” Ptak said. “As an asset manager, the more assets you run, all things equal, the more revenue you derive.”
In the third quarter of its 2007 fiscal year, the company grew its total assets under management to a record $944.8 billion, up $53.4 billion from the previous quarter.
Ptak said the litmus test for success is the revenue line steadily creeping up.
Third quarter revenues for Legg Mason were $1.13 billion, up 10 percent from the previous quarter.
One pitfall Legg Mason must avoid: Don?t take its eye off the ball when it comes to investing money and reassuring its clients.
“Asset management is a trust business,” Ptak said.
“It would really behoove them to go out and hold clients? hands and let them know everything will be all right.”
Legg Mason declined to comment.
