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Author: TMFHelical Big gold star, 5000 posts Old School Fool Coverage Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 16  
Subject: HG pitch Date: 1/6/2009 3:47 PM
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Cohen and Steers (CNS)

This one is more watchlist than HG, as there is a lot of current uncertainty around the stock due to recent market conditions. Still this is a respected asset manager which under stabler times could make for a nice HG.

I think I mentioned this company on the boards a couple of years back. I have owned this in the past for a profit, but had the sense to be out of it for the recent turmoil (not true of everything sadly).

Here we have an asset manager that focuses on funds filled with high dividend equities, primarily REITs. These types of of assets and funds should appeal to the boomer generation as it enters retirement i.e. demographics favor the companies product offerings in my opinion. [To wit - selfish boomers who just won't be satisfied with low yielding bond allocations and will continue to reach for excess return despite the harsh lessons the market has provided them this past decade].

The company has a market cap of $457M but an EV of only $275.7M. Last reported, assets under management (AUM) were $24.624B. Assets are (were) split ~1/3 each between closed end funds, open end funds, and institutional accounts. But.... AUM was last reported at the end of September, a long long time ago investing wise. And 48% of AUM was US based REITs equities, a sector especially hammered by the recent market.

So lets assume AUM drops ~30% (ouch) due to market adjustments and outflows (we should know mid January). That gives us ~$17.24B AUM which puts CNS as currently selling at ~1.5% AUM (give or take a few tenths of a percent). If you subscribe to the mantra of 'buy asset managers at enterprise value < 2% AUM', then CNS is a buy. It is currently a hairy scary risky buy since AUM could continue to drop in coming quarters, but one with the promise of being a nice long term hold (AKA Paydirt style offering or watchlist suggestion).

I would note that the Vanguard REIT ETF is down ~40% over the last quarter. So a 30% drop may be optimistic (and could put some companies out of business). Outflows from the open end funds and institutional accounts would exasperate the AUM drop. Also this large a drop probably precipitated some forced selling in the closed end funds that were leveraged but must stay within some bounds (<50% I think, but don't know for sure). But, again REITs aren't the only assets they hold, so perhaps it won't be as bad as 40+%, and closer to the 30% estimation. We'll see mid January - which might provide another buying opportunity for the very bold (any of those left?).

Bonus suggestion - many (all?) of the closed end funds from CNS recently slashed their payouts, which should have surprised no one but doubtlessly did many. They also switched from monthly to quarterly payout (and cynics could argue the distribution cut was hidden in the press release headlined by the change in distribution schedule - and cynics would be right in my cynical opinion). These CEFs are now selling at massive, unprecedented discounts to NAV, >30% in some cases.

TMFHelical
Community Analyst Team
I have a recent position in CNS, opened after the cut was announced on the closed end funds (a bit more than 10 days back). Don't own a CNS closed end fund.


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Note: Poisiton up nicely so far.
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