How a Santa rally could lift these 3 financial stocks.

If stock markets embark on another seasonal surge these three financial stocks could tell investors with good cheer, says Harvey Jones.

| 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.

Oh I wish it could be Christmas everyday, given what the festive season does for share prices. The FTSE 100 has flown in 26 of the last 32 Decembers, rallying averaged 2.3% over the month, according to figures from Architas. When stock markets soar, financial stocks usually climb even higher. So could these three be flying higher than Santa on Christmas Eve?

Aberdeen Asset Management

The last few years have been tough on emerging markets, and even tougher on specialist emerging markets fund manager Aberdeen Asset Management (LSE: ADN). Its share price is down 45% over the last two years due to a surge in net outflows from disgruntled investors as fund performance slips. It was staging a bit of a rally earlier this year, but now the fight seems to have gone out of it. The reason? Step forward President-elect Donald Trump, raising fears of a trade war with China, Mexico and other emerging economies. The stronger dollar could pile on the pressure, as many have borrowed heavily in the greenback, and this will ramp up their debt servicing costs.

The result? November’s full-year results show Aberdeen suffered £32.8bn of net outflows, with underlying profit before tax down 28% to £352.7m. On the plus side it retains a strong cash position of £548.8m and its juicy 7.52% yield may tempt income seekers. The danger is that a Santa rally sweeps through the US but bypasses emerging markets – and Aberdeen.

Hargreaves Lansdown

Mass-market independent financial adviser Hargreaves Lansdown (LSE: HL) has been a darling of investors in recent years, a true growth success story. Over the last five years, annual revenues have leapt from £238m to £338m, although the rate of growth has slowed lately. In fact, they dipped from £395m to £388m in the year to 30 June 2016, hit by stock market turbulence.

Some of the shine has come off the stock with first quarter net new business inflows of £1.11bn, down 22% year-on-year. However, net quarterly revenue hit a record £90.6m after rising 15%. It now has £67.6bn under administration, up from £61.7bn in June 2016. If you believe in the Santa rally, then Hargreaves Lansdown could be a good way to play it. The downside is that it trades at 32.7 times earnings and needs to keep the growth story going to justify that kind of valuation.

Schroders

Stock market turbulence? What turbulence? Asset manager Schroders (LSE: SDR) has sailed through recent stock-market volatility, its share price more than doubling over the last five years. There have been bumps along the way but it’s hitching the reindeer for a Santa rally after rising 5% in the last week, more than double the rise on the FTSE 100.

Schroders’ latest statement covering the nine months to 30 September showed profits before tax dipping slightly to £436.2m, although assets under management jumped from £294.8bn to £375bn. Net inflows also remain healthy but there’s a price to pay for success, in this case 16.52 times earnings. Still, with growing exposure to the US economy following its acquisition of a securitised credit business in North America, it could still be in for a Merry Christmas.

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 and Hargreaves Lansdown. 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

Photo of a man going through financial problems
Investing Articles

I asked ChatGPT to name the FTSE 250 share it would buy in a heartbeat – and it went mad!

Harvey Jones wondered whether artificial intelligence was up to the job of finding him a brilliant FTSE 250 share to…

Read more »

Tanker coming in to dock in calm waters and a clear sunset
Investing Articles

Is the BP share price primed for lift off?

As an activist investor takes a substantial holding in BP, Andrew Mackie assesses what it will take to energise the…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

No savings? I’m using the 5-step Warren Buffett method as I aim to get rich

Christopher Ruane outlines a handful of investment techniques he uses, inspired by the incredible stock market record of Warren Buffett.

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

With a spare £3,000, here’s how a new investor could start buying shares

Our writer explains how someone with a few thousand pounds and no prior stock market experience could start buying shares…

Read more »

UK money in a Jar on a background
Investing Articles

£10,000 invested in Greggs shares in 2020 has made this much passive income…

Greggs shares have struggled lately due to economic weakness and rising costs. Are they still worth considering for an ISA…

Read more »

British union jack flag and Parliament house at city of Westminster in the background
Investing Articles

Don’t look now, but the FTSE 100’s beating the S&P 500 in 2025…

So far this year, UK stocks have been doing better than their US counterparts. So is the FTSE 100 the…

Read more »

Investing Articles

How much would someone need in UK shares to earn £5,000 in passive income each month?

Thousands of Stocks and Shares ISA investors have built up more than a million pounds and can sit back and…

Read more »

Investing Articles

£10,000 invested in Tesla stock 1 month ago is now worth…

Tesla stock is remarkably volatile for a mega-cap company. While this presents some opportunities for investors, it’s also inherently risky.

Read more »