Trian Fund Keeps Buying Janus Henderson, You Should Join In

Janus Henderson Group (JHG)  was formed when Janus Fund Group here in America merged with money management firm Henderson Group PLC of the U.K.

The company is net debt-free, as corporate cash far exceeds total debt, is highly profitable and pays a better than 4.7% current yield.

Trian Fund, who counts Nelson Peltz as a board member, announced this morning that it raised its stake in JHG to north of 17.6%, from 16.9%.

Trian also owns a chunk of industry cohort Invesvco (IVZ) that totaled 16.72% of shares outstanding as of year-end 2021. It previously suggested the two firms could be substantially more valuable if put together, due to economies of scale and the ability to shed redundant expenses.

That possibility still looms large.

As it sits today, JHG appears quite cheaply valued. Throw out the Covid-year 2020, when profits dipped, and JHG's average price-to-earnings since 2012 was 14.8-times. That was typically accompanied by around 3.53% in current yield.

As of Thursday those figures were much more favorable for new buyers. The stock's forward multiple is now 8.7-times and its yield is 4.75%.

Assume just a partial regression-to-the-mean valuation on this year's estimate of $3.70 and a goal of $53 appears possible by Dec. 31 of this year. That target is not far-fetched. JHG changed hands at $48.55 in November of last year.

Value Line's July of 2023 mid-point target price on JHG sits at $51. Achieving that price would mean making almost 60% in total return over the next 16 months. Value Line's 18-month goal in the graphic below was set in January, 2022.

Research house Morningstar agrees in principle. It labels JHG a 4-star, out of 5, buy. It does not issue year-ahead forecasts, but lets us know that it sees the stock's present-day fair value as -- $41.

Simply bouncing back to that would deliver north of 28% plus any dividends collected while waiting for the move.

Note, too, that Janus Henderson's management team earns a hard to achieve "exemplary" rating for capital allocation.

JHG now presents investors with a better than bond coupon yield plus substantial upside potential. Owning shares outright is the best way to proceed.

That said, option-minded traders might also wish to short some of JHG's Sept. 16 expiration puts at strikes of $30 or $35.

Actual pricing on those, with JHG at $32.30, is shown below.

Worst-case, forced purchase prices dipped to either $27.70 or $29.70 depending on the strike price employed. If you buy into my idea of what JHG is worth, it would be hard to feel stressed out about needing to potentially be "put" below $30. Future stock market action can never be guaranteed. The more than 15-month chart below shows how little time JHG spent below the more aggressive option's break-even point. The more conservative $30 strike's worst-case purchase price of $27.70 was never breached once dating back to prior to Dec. 1, 2020.

JHG is not a home-run in the making, but could easily turn into a baseball-like extra-base hit while paying you nicely for your time.

Buy some shares, sell some JHG puts or consider doing both. 

At the time of publication, Price was short JHG puts and expected to get long JHG shares soon. He was also long IVZ shares, short IVZ options.