If you really don’t know the best place for your money, buying the shares of an investment manager could be a profitable option — I reckon it’s usually a better prospect than handing your cash over for them to manage.
Soaring shares
With that in mind, I was pleased to see shares in Charles Stanley Group (LSE: CAY) climbing by 15% this morning, to 307p.
The driver was a set of first-half results that showed a 13% rise in funds under management and administration to £22.5bn, and an 80% hike in reported pre-tax profit to £3.6m. That resulted in a 46% rise in reported earnings per share to 4.44p, with the interim dividend maintained at 1.5p per share.
A new remuneration package for its employed investment managers and self-employed associates was described by chief executive Paul Abberley as “the successful conclusion of the first stage of our turnaround strategy.” And he added that “we are well positioned to pursue the second phase of our strategy, with an emphasis on building the delivery of organic growth.“
Most companies would be happy to leave it at that, but Charles Stanley says its vision is “to become the UK’s leading wealth manager by 2020.” That’s the kind of ambition I like to see in a company.
Forecasts suggest the firm’s recovery should drop the P/E multiple of the shares to around 13 by the year ending March 2018, and that would give us a PEG ratio of a low 0.2 (where 0.7 and under is usually seen as a good growth indicator).
So Charles Stanley is looking good as a growth investment on that score, but on top of that we should be seeing the return of attractive dividends. The annual cash payment was slashed by more than half in 2015 and kept low for 2016, but we should be seeing the start of a comeback in the current year, and analysts are predicting a 4% yield by March 2018.
Reliable stalwart
My thoughts are also drawn to Aberdeen Asset Management (LSE: ADN), which has intrigued me for some time. Aberdeen’s earnings have fallen a little over the past couple of years, and there’s a big EPS drop on the cards for the year just ended in September — results are due on 28 November, and will be eagerly anticipated.
But a share price fall since early 2015 would still leave us with a P/E of 15 on the current 288p share price, and that doesn’t look too stretching to me — especially as a return to EPS growth forecast for 2017 would drop that ratio to around 13.5.
Aberdeen also has hefty dividends forecast, set to yield 6.8%, though that’s likely to be uncovered this year and only barely covered by forecast 2017 earnings — so news of dividends will be a key thing to look out for.
Aberdeen’s third-quarter update revealed a disappointing net funds outflow of £8.9bn, but that was more than covered by £17.5bn in asset appreciation — it seems those who withdrew their money missed out on a good quarter.
Chief executive Martin Gilbert pointed to the “many uncertainties out there, including the shape of the UK’s future relationship with the EU, which might undermine market confidence.” But to me that suggests it’s time to buy into cheap opportunities rather than selling — and I see Aberdeen Asset Management shares as good value now.
