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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Scott Mc who wrote (4257)	6/11/1998 12:48:00 AM
From: James Clarke	Respond to of 78958

United Asset Management (UAM) looks very very interesting to me too. Anybody who knows what free cash flow is should have this one near the top of their watch list. As with most value investments, there are some real negatives. Take this one for example. In the money management business, your fees are based on assets under management. Which is a function of two things. 1) appreciation of the market (yeah, you get paid 20% more if the market goes up 30% even if you just go up 20%! what a business!) - as long as you retain your clients, bringing me to #2, which is UAM's real problem: 2) additions or withdrawals by investors. UAM has been enjoying the market appreciation, of course, but has not been growing earnings because of some pretty massive withdrawals. That means the customer is not satisfied and is going elsewhere. It also should be obvious that if the market drops significantly, these guys are in real trouble. My view on the market is probably the main reason why I passed on this one. The value is there provided the bull market continues, but the earnings themselves have market risk and I am not interested in taking market risk. This is very different from a cheap stock whose EARNINGS have no relation to the stock market. Plus they've got a bunch of primadonnas at the firms they have bought who don't feel like working hard now that they've sold their firms to UAM. Thats a big issue in the business of consolidating money management firms. But a 9% free cash flow yield is nothing to sneeze at. Jim

To: Scott Mc who wrote (4257)	6/11/1998 9:48:00 AM
From: Paul Senior	Read Replies (1) \| Respond to of 78958

re: UAM. When I looked at it last year, I liked the increasing div., low pe, and fact that several very savvy money managers were buying. What I didn't like was the negative article in Forbes, the gist of which seemed to me to be that, UAM - in order to buy up asset managers - structured deals to allow quite a bit of autonomy to these fund managers. The drawback is that there was (and is) very little that UAM can do to bring about focus, synergies or cost savings to their many acquisitions. That's why I passed-- although the UAM stock went on to do very well without me -g-. Paul