Why BofA Is Upgrading Cohen & Steers, Downgrading T. Rowe Price

Since the presidential election, analysts have witnessed a massive rotation out of high-growth tech stocks and into value stocks. On Thursday, one Wall Street analyst said that rotation could have a meaningful impact on asset managers.

The Analyst: BofA Securities analyst Michael Carrier upgraded Cohen & Steers, Inc. (NYSE: CNS) from Neutral to Buy and raised the price target from $65 to $76.

Carrier also downgraded T. Rowe Price Group Inc (NYSE: TROW) from Buy to Neutral and reiterated a $154 price target.

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The Thesis: In a new note, Carrier said BofA expects the shift from growth to value to continue, and the ratings changes come after he assessed his coverage of asset managers to identify which stocks will benefit and which stocks could potentially be hurt by the rotation.

“Separately, we also see the sector, along with financials more broadly, potentially benefiting since they tend to be more value stocks, though the market rally and recent M&A in the sector has already had some positive impact on valuations,” the analyst said. 

Cohen & Steers has high exposure to the value theme, a track record of strong investment performance and impressive organic revenue growth.

At the same time, while T. Rowe Price is well-positioned for the long-term, its high exposure to growth likely limits its upside in the current climate, he said. 

In addition to the ratings changes, Carrier said BlackRock, Inc. (NYSE: BLK) is the most attractive stock in the asset manager group, while Waddell & Reed Financial, Inc. (NYSE: WDR) has the highest risk of the bunch.

Benzinga’s Take: The rotation from growth to value could generate major cash flow for asset managers with high exposure to value funds.

Yet there have been several brief periods of rotation from growth to value in the past decade, and none lasted long enough to create much more than a short-term trading opportunity.