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Traders Should Follow Billionaire Fund Manager Into Legg Mason

GAMCO increased its stake in LM, which has been on my radar since breaking from a triple-top


Legg Mason (NYSE:LM) — This global asset management company provides investment management and services to institutional and retail clients, company-sponsored mutual funds, and pooled investment vehicles. Fiscal year (FY) 2012 earnings, ended in March, were $1.54, and analysts estimate $2.43 for FY 2013 and $2.92 for FY 2014. 

The stock made news Tuesday morning when billionaire fund manager Mario Gabelli revealed that his asset management company, GAMCO, increased its stake in LM, upping it to 5.13% from 4.05%. Gabelli noted LM’s commitment to a stock buyback program using two-thirds of its cash flow and that the company is known as a “great cash producer.” He expects the stock to “double in a short time.” 

That may be somewhat of an overstatement, but LM has been on my radar since breaking from a triple-top in early January on high volume. The MACD indicator is close to issuing a buy signal, and a break through $29.25 would complete a saucer formation that has taken several years to form and provide a target of $34 to $38. Long-term investors could experience a greater return.

LM Chart
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Trade of the Day Chart Key

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