Is this the top of the market for these finance stocks?

Financial stocks are in the money right now but Harvey Jones warns it may not last.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

A rising tide lifts all boats and these three investment-related stocks have all been lifted by rising FTSE 100 fortunes. But could the tide be set to turn?

Aberdeen Asset Management

After a disastrous 2015, when Aberdeen Asset Management (LSE: ADN) saw its share price halve from around 500p to 250p, investors were due a reprieve. Aberdeen was hit hard by the slowdown in its chosen specialist region of emerging markets, as disgruntled investors headed for the exits in search of more rewarding pastures. Worryingly, net fund outflows have continued in 2016, with £8.9bn bolting in the third quarter. But the good news this time round is that the losses have been more than offset by £17.5bn in asset appreciation. Assets under management duly totalled £301.4bn in June, up from £292.8bn three months earlier.

Fund outflows are slowing as investors recapture their faith in emerging markets, as anybody who understands that investments go in cycles would have expected. But the tide has really turned in favour of Aberdeen since Brexit, and the stock is up 22% in the past three months. Sterling weakness has boosted the value of its overseas assets under management, and as the pound plumbs new depths, the next quarterly figure will make interesting reading. Despite its resurgence, Aberdeen still trades at just 11.03 times earnings and yields 5.73%. So the valuation doesn’t look toppy, even if the stock market does.

Schroders

Asset management group Schroders (LSE: SDR) also fell sharply after the last stock market peak in April 2015, hit by falling profits and a sharp slowdown in first-half net inflows, from £8.8bn to just £0.7bn year-on-year. In July, chief executive Peter Harrison blamed the Brexit vote for the company’s short-term slips and warned of a further hit to investment demand. Well, he got that wrong, didn’t he? Brexit has come charging to the rescue, with markets surging on the back of fresh monetary stimulus and the falling pound.

The Schroders share price is up 21% in the last three months, echoing Aberdeen’s figure, further evidence that stock market trends are driving performance rather than individual company news. Schroder’s struggles when the pound is strong and will cash in on current weakness. Its stock is more expensive than Aberdeen however, trading at 15.85 times earnings and yielding just 3.11%. 

St James’s Place

Wealth manager St James’s Place (LSE: STJ) has had a great Brexit, its share price soaring 28% in the last three months. Not that it needed this artificial booster as it’s up 200% over the past five years. The advisory group reported record inflows of £5.3bn in July, up from £4.4bn one year earlier, lifting total group funds under management from £55.5bn to £65.6bn on the year. The group grew strongly despite recent market turbulence, with adviser numbers, profits and just about everything else rising sharply.

The post-referendum market surge has floated its boat but before you get too excited beware its pricey valuation of 24.35 times earnings, with a relatively lowly yield of 2.88%. At this price, St James’s may no longer be the Place to be.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Aberdeen Asset Management. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

7%+ dividend yields! Here are 2 of the best UK shares to consider buying in June

This Fool has been searching for UK shares with the best dividend yields. Here are two he thinks investors should…

Read more »

Investing Articles

5 FTSE 100 shares to consider buying for passive income right now

The FTSE 100 is having its best start to the year for ages, and that's pushing the top dividend yields…

Read more »

Investing Articles

One overlooked cheap share to tap into the year’s hottest theme?

This Fool describes the key things to think about when investing in copper stocks and analyses one cheap share to…

Read more »

Investing Articles

A cheap FTSE 100 stock that’s ready for a dividend hike in 2024

This banking giant is one of the FTSE 100's greatest dividend stocks. And at current prices, our writer Royston Wild…

Read more »

Growth Shares

Is the BP share price set to soar after Michael Burry invests in the firm?

Jon Smith takes note of a recent purchase from the famous investor behind The Big Short and explains his view…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

I’d focus on Kingfisher now after the Q1 report leaves the share price unmoved

With the share price near 262p, is the FTSE 100’s Kingfisher a decent investment now for dividends and business recovery?

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

£500 buys me 493 shares in this 7.4% yielding dividend stock!

The renewable energy sector remains out of favour. As a result, there are some high-yielders around, including this dividend stock.

Read more »

Road trip. Father and son travelling together by car
Investing Articles

If I’d put £10k into Tesla stock 2 years ago, here’s what I’d have now

Tesla stock has fallen in the past few years. But the valuation looks temptingly low now, as we approach a…

Read more »