The S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is enjoying a relief rally from the coronavirus inspired sell-off. But there’s one stock that could be set to run even harder over the next month or so as it’s set to benefit from multiple headwinds.
That’s the view of Morgan Stanley, which is predicting a 60% to 70% chance that the JANUS/IDR UNRESTR (ASX: JHG) share price will outperform the broader market over the next 50+ days.
Shares in the asset manager haven’t been performing too shabbily so far either. The stock gained 29% over the past 12-months.
That may not be as impressive as the 130% surge in the Magellan Financial Group Ltd (ASX: MFG), which is the star of the sector, but Janus Henderson is running ahead of the ASX 200 at a time when many of its peers aren’t performing too well.
Why JHG is set to run higher
Coming back to Janus Henderson, Morgan Stanley thinks now’s the time to buy the stock given its bullish short-term outlook.
“This is because the stock has traded off recently, making short term valuation much more compelling,” said Morgan Stanley.
“We see too many upside risks for JHG with the largest positive being better retail flows, that we estimate turned positive in 4Q19E.”
Multiple reasons for a re-rating
The improved flows are across multi-asset and fixed income funds, including US and EU equities as well.
“We also see upside risks from expected new US$100m buyback, improving investment performance, potential for performance fee upgrades in 2020, UK tax rate reduction in 2Q20E and more,” added the broker.
These multiple tailwinds is expected to drive a re-rating in the stock from the current circa 9 times price-multiple (P/E) either at its upcoming results announcement or within the next quarter, according to Morgan Stanley.
The broker is recommending the stock as “overweight” (meaning a “buy”) with a price target of $74 a share.
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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.