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Kass: 5 Stocks About To Head South

Friday, 5 Mar 2010 | 5:39 PM ET

If you’re looking for some short ideas, widely followed strategist Doug Kass has a few names for your radar.

In his column, Kass says he plans to ‘substantially increase his short positions in asset managers, namely Franklin Resources , T. Rowe Price , AllianceBernstein, Federated Investorsand Janus Capital .

Considering that financials appear to have stabilized, we wanted to hear more about his thesis. So we invited him on Fast Money and Kass explained all.

Kass says a number of factors appear likely to drag down asset managers. They include:
- weak inflows (because of economic factors)
- less matching by corporations
- a tired market

But perhaps the biggest – and least talked about – drag on the asset managers involves new SEC regulation. There’s growing chatter that Chairman Mary Schapiro is about to crack down on so-called 12b-1 fee.

And that could hit assets managers where it hurts most -in the wallet. And we’re not talking small potatoes. The fees total over $13 billion a year.

But everything comes with a fee; why so much tempest around this fee?

Because many retail investors complain it’s a hidden fee.

Although it’s not technically hidden it isn’t exactly transparent either. Instead of charging a flat fee that you clearly see on a statement – the 12b-1 fee is subtracted from the fund’s Net Asset Value or NAV. Understanding the calculation really involves reading the prospectus very, very carefully.

The Man Who Called It
Discussing this week's rally, with Doug Kass, Seabreeze Partners.

Of course the fees are perfectly legal,; they go toward covering the firms' sales and marketing costs but SEC believes, “investors may have no idea these fees are being deducted, what services they are paying for or who they are ultimately compensating.”

And as a result, the SEC is considering limiting the fees, mandating better disclosure and even killing them all together.

“I believe we need to critically rethink how 12b-1 fees are used and whether they continue to be appropriate," says Schapiro.

And Kass isn't the only strategist who sees headlines for the asset mangers.

"I agree with Doug," reveals veteran trader Gary Kaminksy. "I think they're facing major margin pressures as well as revenue short falls."

What do you think? We want to know! Answer the question, above.


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Trader disclosure: On March 5, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Grasso Owns (TSO), (AAPL), (ABK), (ASTM), (BA), (BAC), (BGP), (C), (COST), (CSCO), (PFE), (PRST), (V), (WMT), (FAZ); Nations Owns (MSFT), (SPY); Edwards Owns (AAPL) For Clients; Edwards Owns (GLD) For Clients; Edwards Owns (SPY) For Clients; Edwards Owns (QQQQ) For Clients; Edwards Owns (MSFT) For Clients; Edwards Owns (GOOG) For Clients; Edwards Owns (GS) For Clients ; Jon Najarian Owns (AAPL), (AAPL) Call Spreads; Jon Najarian Owns (GS), (PCX); Pete Najarian Owns (BAC) Call Spread; Pete Najarian Owns (TEX) Calls; Pete Najarian Owns (CEPH) Call Spread; Pete Najarian Owns (AKAM) Call Spread; Finerman's Firm Is Short (IJR), (MDY), (IYR), (SPY), (IWM), (UNG), (USO); Finerman's Firm Is Long S&P Puts; Finerman Owns (AAPL); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm And Finerman Own (GOOG); Finerman's Firm Owns (WFC) Preferred; Kelly Owns (ELX) Calls; Kelly Owns (AMZN) Calls; Seymour Owns (CHL), (TSO)

For Tim Seymour
Seygem Asset Management Owns (CBD)

For Brian Kelly
Kanundrum Capital Owns (C)
Kanundrum Capital Owns (JPM)
Kanundrum Capital Owns (IPI)
Kanundrum Capital Owns (POT)
Kanundrum Capital Owns (MOS)
Kanundrum Capital Owns (EZU) Puts
Kanundrum Capital Is Long U.S. Dollar
Kanundrum Capital Is Short Copper
Kanundrum Capital Is Short (FCX)
Kanundrum Capital Is Short (GS)
Kanundrum Capital Is Short (JWN)
Kanundrum Capital Is Short T-Notes
Kanundrum Capital Is Short Yen
Kanundrum Capital Is Short Euro
Kanundrum Capital Is Short Pound
Kanundrum Capital Is Short Swiss Franc
Kanundrum Capital Is Short (SLX)

For Doug Kass
Kass's Fund Is Short (BEN)
Kass's Fund Is Short (TROW)
Kass's Fund Is Short (AB)
Kass's Fund Is Short (JNS)

For Charles Kantor
Neuberger Berman Owns More Than 1% Of (AMT)
Neuberger Berman Owns More Than 1% Of (BIP)
Kantor Or A Family Member Owns (BIP)

For Mike Khouw
Cantor Fitzgerald & Co. Is A Market Maker In (JPM)

For Steve Grasso
Stuart Frankel & Co. Inc. And Its Partners Own (ABK)
Stuart Frankel & Co. Inc. And Its Partners Own (CUBA)
Stuart Frankel & Co. Inc. And Its Partners Own (GERN)
Stuart Frankel & Co. Inc. And Its Partners Own (GLG)
Stuart Frankel & Co. Inc. And Its Partners Own (HSPO)
Stuart Frankel & Co. Inc. And Its Partners Own (NWS.A)
Stuart Frankel & Co. Inc. And Its Partners Own (NXST)
Stuart Frankel & Co. Inc. And Its Partners Own (NYX)
Stuart Frankel & Co. Inc. And Its Partners Own (PDE)
Stuart Frankel & Co. Inc. And Its Partners Own (PRST)
Stuart Frankel & Co. Inc. And Its Partners Own (RDC)
Stuart Frankel & Co. Inc. And Its Partners Own (TLM)
Stuart Frankel & Co. Inc. And Its Partners Own (TOL)
Stuart Frankel & Co. Inc. And Its Partners Own (XRX)
Stuart Frankel & Co. Inc. And Its Partners Own (SDS)
Stuart Frankel & Co. Inc. And Its Partners Are Short (QQQQ)
Stuart Frankel & Co. Inc. And Its Partners Are Short (CL)




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