When stock markets fly, financial stocks typically fly higher. This week’s impressive FTSE 100 rebound has been great news for some of the top financial services companies listed on the index.
These fabulous five are all flying again: how high can they go?
Aberdeen Heads North
Two weeks ago I described Aberdeen Asset Management (LSE: ADN) as a “suffering stock with rebound potential” but I didn’t expect it to bounce back this quickly. The emerging markets specialist is up more than 15% in the last week, as investors rediscover their appetite for risk.
Markets seem to be banking on the proceeds of another Chinese stimulus package, which hasn’t yet been confirmed. Yet this week’s recovery is undeniably encouraging, and trading at 10.66 times earnings and yielding 5.17%, Aberdeen is still valued to go.
Hargreaves Wins Hands Down
China isn’t the only reason markets are flying: investors are also celebrating the perpetually deferred US rate hike. Hargreaves Lansdown (LSE: HL), the UK’s most popular IFA, is up 5% over the last week. Always anxious to protect its bottom line, Hargreaves has switched away from offering full-blown independent financial advice to a more restricted service, in a bid to keep its regulatory costs down.
Its share price has stood up well even when markets have been falling, a fact reflected in its pricey valuation of more than 37 times earnings and lowly 1.67% yield. Hargreaves has been pricey for years but so far, it has been a price worth paying.
The Feeling Is Mutual
Three weeks ago I had this to say about Old Mutual (LSE: OML): “With the share dropping 15% in the last three months, now could be a good time to buy.” And so it proved, with the Anglo-South African company rising more than 9% in the last week alone.
It was helped by a positive note from Barclays, which said the stock is under priced, has a robust emerging markets operation, and has de-risked its balance sheet. It upgraded Old Mutual to “overweight” which looks a good call to me, especially with the stock trading at just 11.59 times earnings and on a forecast yield of 4.60%.
Taming Of Schroders
Given all the fun of the financials, I expected asset manager Schroders (LSE: SDR) to have done better this week, but it is up just 3.5%. Trading at 17.19 times earnings and yielding just 2.70%, it looks fully valued compared to wealth managers Aberdeen and Old Mutual.
The Schroders share price has had a solid five years, in defiance of turbulent stock markets. It is up an impressive 25% over the past 12 months, while the FTSE 100 was flat over the same period. Last month I said that “Schroders could be a great risk-on stock when investors get their appetite back”. As it turned out, it wasn’t quite risky enough.
Heaven’s Alive!
Wealth manager St James’s Place (LSE: STJ) has enjoyed a storming five years rising 225%. It is up another 5% in the last week. The story here seems the same as at Schroders, only more so. Trading at over 25 times earnings and yielding around 2.5%, the stock isn’t exactly a bargain.
If you expect the recent bull run to continue and are looking for under-priced financials, Aberdeen Asset Management and Old Mutual could be the place to start. Risk-on!
