A number of problems have caused Legg Mason’s stock to decline 20% so far this year, on top of a 20% decline last year, The Baltimore Sun reports.
Weak performance in a number of its mutual funds, particularly the flagship Legg Mason Value Trust Fund run by Bill Miller, have caused investors to pull $4 billion from its mutual funds. On top of this, the integration of Citigroup’s money management division over the past two years has proven to be more difficult than Legg Mason anticipated, according to some analysts, and its money market funds have $10 billion of exposure to subprime debt through structured investment vehicles. In fact, sales have slowed so much that Legg Mason renegotiated an agreement with Citigroup in September to sell some share classes through other brokers.
In addition, earlier this year, Legg Mason selected a new CEO to replace 71-year-old Raymond A “Chip” Mason, but the appointee backed away from the job and the company is still in the process of finding a new chief executive.
But Mason defended his firm’s performance at a recent Merrill Lynch conference: “Everybody tells us that we were not growing fast enough. We’re not doing well. We’re not earning enough. We’re not getting a return to shareholders. I don’t really know what else we could have done. I think our earnings have continued to do well in spite of what all of you seem to believe.”
But not all analysts are sour on Legg Mason, Andrew Richards of Morningstar among them. He thinks the stock is undervalued.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.