Asset management stocks have been hit hard by the market selloff this year, with some falling 35% to 45%, almost double the fall
index finger. No industry is more directly linked to the stock and bond markets, and a bear market reduces managed assets, revenue and profits. Earnings estimates for 2022 have been declining lately and profits are in danger of falling below last year’s results.
However, even in this deteriorating scenario, stocks look attractive. Many asset managers trade at 10 times their projected earnings for 2022 or less and return 3% to 5%. Most companies have strong balance sheets and dividends generally look safe. The group offers a toy for the stock market recovery and the long-term investment and retirement needs of the great millennial generation, whose oldest members are about 40 years old.
Top asset managers traded on the stock exchange include
T. Rowe Price Group
These traditional managers are traded for lower valuations by the experts of higher development alternatives and higher pay, such as p.
“Many of these stocks are extremely cheap compared to our estimates of fair value,” said Greggory Warren, an analyst at Morningstar. Favors industry leader BlackRock as well as T. Rowe Price.
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BlackRock is valued at $ 9.6 trillion and has the leading trading platform on iShares. As Warren notes, investors reward asset managers for the organic development of managed assets and margins.
“BlackRock stands out because it leads the cosmopolitan shift to passive investment,” he says. “Between index-based companies and ETFs, it produces an organic annual growth of 3% to 5% in managed assets, when most everyone else is struggling to create positive organic growth.”
BlackRock flows into long-term strategies ran at an annual rate of 5% in the first quarter. The company also has operating profit margins of 40% now.
Shares of BlackRock, which are trading at about $ 585, are back to where they were in early 2018, when the assets of the company under management were $ 6 trillion. The share trades for 15 times the projected profits of 2022 and returns of 3.3%. Warren puts the fair value at $ 880 per share.
“BlackRock continues to widen the gap,” said CFRA analyst Cathy Seifert. He points to the company’s technological initiatives, such as Aladdin, a portfolio management system that is gaining ground in the investment industry.
|Company / Ticker||Recent price||YTD Change||Market value (billion)||2022E EPS||2022Ε Π / Ε||Dividend yield||AUM (diil)|
|AllianceBernstein Holding / AB||$ 40.39||-17.3%||$ 4.0 *||$ 3.27||12.3||9.9%||$ 735|
|BlackRock / BLK||585.77||-36.0||88.7||38.42||15.2||3.3||9,570|
|Franklin Resources / BEN||23.15||-30.9||11.6||3.59||6.5||5.0||1,478|
|Invesco / IVZ||15.97||-30.6||7.3||2.47||6.5||4.7||1,556|
|T. Rowe / TROW price group||106.09||-46.1||24.1||10.07||10.5||4.5||1,552|
* Reflects AB’s 35% publicly traded stake. E = estimate. AUM = data under management
T. Rowe Price recorded one of the biggest hits in the industry, with its shares falling 46% to $ 106. The former investor favorite had outflows and the performance of its growth-oriented mutual funds has been miserable this year. One of its emblematic funds,
T. Rowe Price New Horizons
(PRNHX), fell by 40% this year.
However, the company has one of the best franchises among traditional managers, ranking No. 3 in target funds with a target date behind Fidelity and Vanguard, and a historically strong return on investment. It has an impressive return record for shareholders, with an annual increase of 17% in profits and dividends over the last 30 years. It now trades cheaply with 10.5 times the projected profits of 2022 and returns 4.5%.
T. Rowe Price also has one of the best balance sheets in the industry, with $ 3.5 billion or $ 16 per share, net cash and equity investments.
“Among active managers, he is the best,” says Warren. “The current multiple of 10 to 11 times is unprecedented for T. Rowe.” Warren has a fair value of $ 155 on T. Rowe shares.
The stock has historically traded for 15 times futures.
AllianceBernstein, 65% owned by an insurer
(EQH), was a success story under the radar, with steady inputs. Its affiliates, at about $ 40, outperformed the asset management group this year. The company’s asset mix is approximately 45% shares, 40% bonds and 15% alternative and other investments. It also has an attractive retail brokerage firm aimed at high net worth clients.
Structured as a partnership that pays a low tax rate of less than 10%, the company has no fixed payment. Instead, it pays off almost all of its dividends and now returns about 10% based on final 12-month payments.
Invesco has a widely diversified business, including active and passive vehicles, with $ 1.6 trillion in assets under management and one of the best inflow stories in the group. Its best business is the ETFs, led by $ 150 billion
Invesco QQQ Trust
(QQQ). Invesco is No. 4 behind iShares, Vanguard and
(STT) in ETF assets. The share, at about $ 16, trades only for 6.5 times the projected profits of 2022 and returns of 4.7%. “Management has worked hard to change the return on mutual funds and flow trends have been positive this year,” says Seifert.
To boost growth, Franklin Resources has made a number of acquisitions in recent years, as highlighted by the $ 6.5 billion Legg Mason deal in 2020, which nearly doubled its assets under management.
The company’s share, at about $ 23, trades just six times its projected earnings in the fiscal year of September 2022. It returns 5% and the dividend looks stable, given the payout percentage below 35%. The low valuation reflects the persistent net outflows that the company sought to address by developing its alternative asset management business, which now totals investments of more than $ 200 billion.
With their lightweight business models, investment managers should be able to overcome the market downturn. Their distressed stocks offer a good game in a possible market recovery.
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