Franklin Resources (BEN): A Bull Market Stock


By Michael Cintolo, Vice President of Investments and Editor of Cabot Market Letter and Cabot Top Ten Report
From Cabot Wealth Advisory, 11/26/09. Sign up for free Cabot Wealth Advisory e-newsletter

Here are the most impressive stock market-related numbers I know of: 8, 6, 5, 2, 1, 6, 2, 8, 3 and 1. What are they? Those are the number of stocks on the NYSE hitting new 52-week lows during the past couple of weeks. In our very long history of data (going back into the 1960s), our studies show that when the number of new lows is this small, the market has basically zero chance of entering a prolonged decline.

In other words, this remains a bull market. And while I’m seeing fewer stocks that really jump off the page at me, one easy way to play a bull market is by investing in … bull market stocks! What are those? Simply companies that directly benefit from a healthy stock market, companies like investment banks, asset managers, private equity firms, and so on.

My favorite bull market stock is Franklin Resources (BEN), which runs the Templeton mutual fund family. Like every other money manager, Franklin’s business fell apart during the crash of 2008, but asset levels have roared back with the market this year–up from a low of $378 billion at the end of February to $523 billion at the end of October. And because the firm takes a cut of every dollar it manages, higher asset levels lead to higher revenue.

Better yet, the top brass has been adept at leveraging these higher asset levels into great earnings growth. The bottom line has jumped from 48 cents a share in the first quarter to $1.29 in the second and $1.60 in the third. Analysts expect $6 per share in earnings over the next 12 months, but I think that will be conservative, as the bull market in stocks drives asset prices higher … and, importantly, attracts new money from individuals.

The stock has been consolidating for the past four-plus weeks, with good support around 100. A break below that level would be worrisome, but the odds favor higher prices. So I think you can buy some here, and look to add some on a breakout above 116 (hopefully along with a strong upmove in the market itself).


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? For the past two difficult years, Cabot socked the S&P 500 by a whopping 82%. (Market was down 26%.)
? For the past five years, Cabot stomped the market by a hefty 60%. (Market was down 8%.)
? For the past 10 years, Cabot dominated the market by a staggering 113%! (Market was down 26%.)
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Mike CintoloMichael Cintolo
Vice President of Investments and Editor of Cabot Market Letter and Cabot Top Ten Weekly

A growth stock and market timing expert, Michael Cintolo is editor of Cabot Market Letter and Cabot Top Ten Weekly. Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable was his development of the proprietary trend-following market timing system, Cabot Tides that has helped Cabot place among the top handful of market-timing newsletters numerous times.