Shares in currency manager Record (LSE: REC) have soared by as much as 11% today after it released an encouraging third quarter update. Assets under management increased by 0.4% in US dollar terms and by 3% in sterling terms, with Record’s passive hedging assets and currency for return assets offsetting a fall in dynamic hedging assets.
Looking ahead, Record is optimistic regarding its future growth prospects since interest in currency hedging is growing due to the potential consequences of diverging monetary policy across the globe. Alongside this is a new licensing agreement between Record and WisdomTree Investments that the company hopes will allow it to reach a wider potential customer base.
With Record due to post a fall in earnings of 12% in the current year and a further fall of 10% next year, investor sentiment in the company could come under pressure. And while Record trades on a price-to-earnings (P/E) ratio of 10.6 even after today’s share price gain, it appears to be a stock to watch rather than buy at the present time.
Close call
Also reporting today was diversified financial company Close Brothers (LSE: CBG). Its update was rather mixed, with the company reporting that while its banking division continues to grow, its securities unit is still being hurt by weak market activity and its asset management division is being negatively impacted by recent market movements.
Despite this, Close Brothers’ asset management division still delivered net inflows in the quarter, although total client assets fell from £10.8bn to £9.4bn due to the disposal of the company’s corporate activities as well as falling asset prices. And with Winterflood’s performance in Close Brothers’ securities division experiencing persistent challenging trading conditions, its profitability is somewhat disappointing.
With Close Brothers trading on a P/E ratio of just 10.4, it appears to offer good value for money even though earnings are due to rise by just 3% this year. And with its banking loan book increasing by 4.9% in the quarter and the scope for improved trading conditions in its securities and asset management divisions, it seems to be worth buying for the long term.
Opportunity knocks
Also offering capital gain potential in the coming years is Aviva (LSE: AV). The life insurer is now more dominant than ever as a result of its merger with Friends Life and this should allow it to offer greater resilience and more robust financial performance moving forward. Additionally, the combination is set to mean significant synergies and cost savings that don’t yet appear to be fully reflected in Aviva’s valuation. For example, it trades on a P/E ratio of 9.4 and is expected to grow earnings by as much as 11% in the current year.
Clearly, buying insurance stocks such as Aviva during periods of market turmoil could be viewed as a relatively risky strategy. After all, Aviva’s beta of 1.2 indicates that its shares will be more volatile than the wider index. However, for long-term investors such times also present a major opportunity to buy a high quality company such as Aviva at a discounted price. With its financial performance on the up, now could be the perfect time to buy a slice of the business.
