Wadell Reed WDR
April 08, 2020 - 2:25pm EST by
2020 2021
Price: 11.87 EPS n/a n/a
Shares Out. (in M): 67 P/E n/a n/a
Market Cap (in $M): 782 P/FCF n/a n/a
Net Debt (in $M): -746 EBIT 0 0
TEV ($): 36 TEV/EBIT n/a n/a

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Waddell is an asset manager with 70 bn in AUM and they also do brokerage / RIA work for their
clients; about a 50 50 split between asset management and brokerage / RIA work. Everyone
knows this business is under a lot of stress consequently the stock has been getting hammered.
If you look at the short recommendation on VIC, the person that wrote it estimated revenues
declining by something like 30 pct a year when he wrote is a couple years back. Nothing of the
sort has materialized (see below), the performance has been much better operationally but the
stock has been a disaster; that being said that statement excludes the economic effects of this wu-
vir thing.
Back to the positives:
The company generated 168 mln in Free cash flow last year (2019) it has a TEV of 36 mln
dollars because it has 94 mln in debt 840 in cash and investments and a market cap of
782 mln dollars. So you are buying the company at 0.21x free cash flow. Thats right, zero point
two one times free cash flow.
Now lets get to the adjustments:
Whack free cash flow by 50 % for 2020 gives you 80 mln
Whack short term investments like this:
Cash: stays at 151 mln
Investment securities becomes (see below):
Total available for sale securities becomes: 245 mln (Talked to Co and these are all IG bonds)
Total trading securities becomes: 150 mln
Equity securities becomes: 105 mln
Sponsored funds becomes: 20 mln
Total: 520 mln
So your TEV becomes: 782 + 94 - 151 -520 = 205 mln
Your adjusted FCF becomes: 80 mln
Your TEV / FCF becomes: 2.5 x
In the meantime you collect an 8 pct dividend on your cash with this thing.
The reality is that this management needs to get fired. They are granting themselves 50 mln in equity
yearly which is greater than the TEV for mediocre mutual fund performance. That is insanity, but no one
seems to be paying attention.
If there is an institutional investor on here reading this, that wants to go activist on this please let me
know. Get my name and number from the VIC people. I will gladly take a small consulting fee.
Additional information:


I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


Sit on your butt and wait.

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