Calamos Asset Management Inc. [NDAQ:CLMS - $13.05] is a publicly owned investment manager. The firm provides investment advisory services to individuals, institutions and private foundations. They manage separate client-focused open-end and closed-end for its clients. CLMS also offers separately managed accounts to its clients. Their investment strategies cover equity, global/international, balanced, high yield, convertible, and alternative investment classes. The firm employs qualitative and fundamental analysis with both top-down and bottom-up stock picking approaches. Calamos Asset Management was founded in 1977 and is based in Naperville, Illinois.
CLMS came public in late 2004 and attracted a lot of investor interest. Their shares rose from a 2004 low of $19.40 to an April 2006 high of $44.10 as EPS grew at a nice rate while the markets were booming. Earnings dipped a bit in 2007 before falling off a cliff in 2008 when the market melted down.
CLMS was caught in a forced liquidation mode in late 2008 when the credit markets froze. They de-levered, cut the dividend and regrouped by reducing head count. While painful, these actions set the stage for a big rebound in 2009. All four quarters showed huge improvements in year-over-year earnings and Q4 came in well above estimates.
Assets under management climbed from $25.276 billion as of year-end 2008 to $32.714 billion on December 31, 2009. Their investment performances has been stellar allowing for both organic asset growth and net new money flows into their funds. The closed-end Calamos Convertible Opportunities and Income Fund announced a secondary share offering this January when the shares were at a premium to NAV. This will immediately add a nice chunk of new AUM to their permanent fund base (as closed-end funds do not make direct redemptions when public investors sell their shares).
Here are their per share numbers from continuing operations as reported by Value Line:
Current estimates for 2010 and 2011 EPS have been raised to $0.92 and $1.09 respectively putting the multiple at about 14.2x this year’s and< 12x next year’s expectations. That’s quite low by historical standards for CLMS shares as can be seen in the chart above.
Another measure of how undervalued these shares remain is to look at their present price/book value relationship compared with their historical ranges. Here is a chart showing their annual highs and lows versus book value.
Excepting the period from late 2008 through early 2009 the price/book value for CLMS never went below 1.9x and it ranged from 2.0x – 4.8x book value at some point during each calendar year since their 2004 IPO. By year-end 2010 book value should be about $8.25 /share. A return to even two times book value would lead me to a $16.50 target price – 26.4% above yesterday’s closing price of $13.05.
Is that a reasonable 12-month goal? It would be about 17.9x projected earnings versus the better than 21x average P/Es of the 2004 – 2007 period. It would also be well below all peak price/book value relationships during ‘normal’ market conditions.
The dividend was recently increased from $0.055 to $0.075 quarterly making the current yield a decent 2.3%. That yield could easily be raised again in the future as it represents a payout ratio of only 32.6% of projected 2010 EPS.
Calamos stock is virtually unknown among individual investors. As of September, 2009 about 91% of its shares were held by institutions and mutual funds. Here are some of its largest holders as of 9/30/09:
My conservative target price offers over 28% total returns over the next 12-months if things play out as expected. That is hardly an upper limit though, as CLMS shares actually traded above $20 in each of the five years 2004 – 2008 and fundamentals are definitely on the upswing.
Calamos offers options opportunities but the market is very thinly traded. Use limits and show patience if you chose to play CLMS in this way.
Disclosure: Author is long CLMS shares and short CLMS options.
CLMS came public in late 2004 and attracted a lot of investor interest. Their shares rose from a 2004 low of $19.40 to an April 2006 high of $44.10 as EPS grew at a nice rate while the markets were booming. Earnings dipped a bit in 2007 before falling off a cliff in 2008 when the market melted down.
CLMS was caught in a forced liquidation mode in late 2008 when the credit markets froze. They de-levered, cut the dividend and regrouped by reducing head count. While painful, these actions set the stage for a big rebound in 2009. All four quarters showed huge improvements in year-over-year earnings and Q4 came in well above estimates.
Assets under management climbed from $25.276 billion as of year-end 2008 to $32.714 billion on December 31, 2009. Their investment performances has been stellar allowing for both organic asset growth and net new money flows into their funds. The closed-end Calamos Convertible Opportunities and Income Fund announced a secondary share offering this January when the shares were at a premium to NAV. This will immediately add a nice chunk of new AUM to their permanent fund base (as closed-end funds do not make direct redemptions when public investors sell their shares).
Here are their per share numbers from continuing operations as reported by Value Line:
Year | Sales | EPS | Div. | B/V | Avg. P/E | 52-wk Range |
2004 | 13.57 | 1.09 | 0.07 | 6.89 | 22.6x | 19.40 – 28.35 |
2005 | 18.16 | 1.26 | 0.30 | 8.09 | 21.1x | 20.55 – 32.81 |
2006 | 20.95 | 1.45 | 0.38 | 9.26 | 21.6x | 24.23 – 44.10 |
2007 | 22.68 | 1.22 | 0.44 | 10.24 | 21.5x | 20.08 – 34.61 |
2008 | 20.08 | d. 0.01 | 0.39 | 7.73 | NMF | 2.55 – 29.67 |
2009 | 14.33 | 0.62 | 0.22 | 7.67 | 15.5x | 2.74 – 15.47 |
Current estimates for 2010 and 2011 EPS have been raised to $0.92 and $1.09 respectively putting the multiple at about 14.2x this year’s and< 12x next year’s expectations. That’s quite low by historical standards for CLMS shares as can be seen in the chart above.
Another measure of how undervalued these shares remain is to look at their present price/book value relationship compared with their historical ranges. Here is a chart showing their annual highs and lows versus book value.
Year | P/BV at High | P/BV at Low | Current P/BV |
2004 | 4.1x | 2.8x | |
2005 | 4.2x | 2.5x | |
2006 | 4.8x | 2.6x | |
2007 | 3.4x | 1.9x | |
2008 | 2.9x | 0.33x | |
2009 | 2.0x | 0.36x | 1.7x |
Excepting the period from late 2008 through early 2009 the price/book value for CLMS never went below 1.9x and it ranged from 2.0x – 4.8x book value at some point during each calendar year since their 2004 IPO. By year-end 2010 book value should be about $8.25 /share. A return to even two times book value would lead me to a $16.50 target price – 26.4% above yesterday’s closing price of $13.05.
Is that a reasonable 12-month goal? It would be about 17.9x projected earnings versus the better than 21x average P/Es of the 2004 – 2007 period. It would also be well below all peak price/book value relationships during ‘normal’ market conditions.
The dividend was recently increased from $0.055 to $0.075 quarterly making the current yield a decent 2.3%. That yield could easily be raised again in the future as it represents a payout ratio of only 32.6% of projected 2010 EPS.
Calamos stock is virtually unknown among individual investors. As of September, 2009 about 91% of its shares were held by institutions and mutual funds. Here are some of its largest holders as of 9/30/09:
Morgan Stanley | 21.46% |
J P Morgan Chase | 8.50% |
Barclays Global | 5.63% |
Vanguard Group | 5.08% |
Fidelity Funds (FMR) | 4.62% |
My conservative target price offers over 28% total returns over the next 12-months if things play out as expected. That is hardly an upper limit though, as CLMS shares actually traded above $20 in each of the five years 2004 – 2008 and fundamentals are definitely on the upswing.
Calamos offers options opportunities but the market is very thinly traded. Use limits and show patience if you chose to play CLMS in this way.
Disclosure: Author is long CLMS shares and short CLMS options.
