For conservative investors in 2019, my top idea is Janus Henderson (JNS); for more risk-oriented investors, my top pick is General Electric (GE), explains Bruce Kaser, editor of The Turnaround Letter.
JanusHenderson is a $378 billion (assets) investment manager. The shares have been weighed down by concerns over asset outflows from weak mutual fund performance combined with clients’ growing preference for ETFs, of which Janus offers very few.
Its 2017 merger of equals didn’t go as smoothly as expected. However, Dick Weil, who led Janus’ prior turnaround, is now the sole CEO, and we believe he will bring improvements to the combined company. Most compelling is Janus’ valuation, at a very modest 6.8x earnings and 3.7x EBITDA.
The company is generating considerable free cash flow and its cash balance is greater than its outstanding debt. Its 7.4% dividend yield looks sustainable.
Following General Electric’s jaw-dropping fall from the pinnacle of Corporate America, GE is a chastened company determined to work its way back from the brink.
Its highly-capable new CEO is rapidly taking remedial action: it filed to IPO its healthcare unit, is divesting many of its other operations and ownership stakes including Baker Hughes, announced a split-up of its struggling Power unit, replaced another board member, and is replacing its long-time independent auditor.
While there are still many uncertainties and risks ahead, the company appears to be finally moving in the right direction. Its heavily sold stock appears to reflect all but a worst-case scenario.
