Legg Mason and the Coming Redemptions & Misses (LM, LMVTX)

Legg Mason Inc. (NYSE: LM) is having a rough morning to say the least.  The investment manager’s shares are being hit after Credit Suisse took an already cautious Neutral rating down to an even lower Underperform rating on the stock.  The $42.00 target stands, which is under current share prices by about 4%.  Credit Suisse believes that the firm is going to be unable to meet earnings expectations for multiple quarters and believes this firm is going to be riddled with redemptions and client defections to other managers as end of year reviews are coming up. 

For those that follow the company, value manager Bill Miller has hadmore than a rough patch after a 15-year streak and his funds have beenreportedly hit with major redemptions as the key Legg Mason Value Fund(LMVTX) saw its value in mid to late 2007 fall from over $70 to under$40 by July before the recent recovery. 

It looks like Legg Mason itself has already missed four of the last original earnings estimates as is.  As far as peer calls, the consensus analyst target for this stock is between $47.00 and $48.00 on last look.

Legg Mason shares are down 8% at $43.50 in the first 30 minutes oftrading.  Since the July lows the stock has recovered from a 52-weeklow of $27.57.  It is still down over 50% from the 52-week high of$88.21 and shares were previously north of $100.00.

Jon C. Ogg
September 4, 2008