Virtus Investment Partners (NASDAQ:VRTS) was spun off by The Phoenix Companies (NYSE:PNX) on Dec. 31, 2008. Phoenix shareholders received one share in Virtus for every 20 shares held in the parent. During the five-year period from 2002 to 2007, management restructured its business model to dramatically reduce its overhead and increase profitability. The result? Since early 2009, its stock is up more than 2,000%. Those who unloaded their shares in the parent and bought more of Virtus did very well indeed.
As of the end of March, Virtus had $51.2 billion in assets under management, 76% of which are retail mutual funds. In the first quarter, its long-term open-end mutual funds saw net flows increase 13.8%, or $3.56 billion, from the end of December, along with market appreciation of another $1.1 billion. As a result of this growth, its adjusted operating income in Q1 increased 57% year-over-year to $25.1 million. The first quarter was Virtus’ best quarter ever, growing equity and fixed-income fund sales by 79% and 49%, respectively.
Virtus’ product diversity has enabled it to gain market share, resulting in fatter margins. Even though it has had a strong four-year run, there appears to be plenty of growth ahead. This is my favorite of all four picks.