Tuesday, January 24, 2006
Doubleclick to increase size of chart. Northern Trust is a specialized bank headquartered in Chicago Illinois. Over the past decade, they have narrowed their focus to managing the assets for the wealthiest families in the United States. They continue to add assets through their marketing efforts in high net worth areas of the country, and in good years for stocks, they get an extra kiss to their fees from asset appreciation. It is a rather simple strategy, but they have been at it so long that most of their would-be imitators are years behind them in building a brand. Our dividend valuation model suggests that NTRS is currently 30% undervalued. This may not seem possible, but the power of NTRS is in periods of rising stock markets. Thus, NTRS is like a mutual fund company in this regard, but I believe their assets are much more sticky and they should be accorded a higher PE. Fidelity Investments is the only asset manager in the country with the brand recognition of NTRS, and among the very rich, NTRS has few publicy traded rivals. I believe the stock market is undervalued, and if I am correct, NTRS will not stay undervalued for long. We own NTRS in our Blue Chip Growth Portfolios.