Legg Mason, Inc. (LM)

TMFMattyA (93.66) Submitted: 4/17/2008 3:42:52 PM : Start Price: $55.81 LM Score: -32.90

Legg Mason has a strong stable of quality asset managers and brands, including the Legg Mason and Royce funds. At this moment, the company is trading at 0.75% of its total assets under management (AUM). According to famed-investor Marty Whitman, the usual fair valuation for an asset manager is 2% of AUM plus tangible book value. This approach would value Legg's shares well into the $100s. Even taking a conservative approach, expecting a decline of $100 billion in Legg's AUM due to poor performance by its equity funds, and taking a 1.2% of AUM valuation approach, I value Legg's shares north of $80. That's a nearly 50% premium to the current stock price. New CEO Mark Fetting knows what he is doing, and is an honest and able manager. This stock won't remain cheap for long.