Recent stock market turbulence has been tough on hedge fund specialist Man Group (LSE: EMG), its stock plunging 17% in a single week. However, it is up 4% today, helped by the wider stock market rally and a solid if unspectacular trading statement.
The statement covering its third quarter to 30 September showed a small increase in funds under management from $113.7bn to $114.bn, helped by net inflows of £400m, despite a previously announced $2.2bn client redemption. Man also posted a positive investment movement of $900m, which helped offset negative foreign exchange movements of $700m.
My worry is that Man is working to a full-year forecast of $12.2bn flows and Shore Capital reckons it needs net Q4 inflows of $3.5bn to hit that target, which requires some acceleration from here.
CEO Luke Ellis highlighted strong continuing inflows. “Investment performance in the quarter was mixed with strong absolute and relative performance in our momentum and discretionary long only strategies but weaker relative performance in our discretionary alternative and systematic equity strategies.”
He said Man Group is well positioned, with strong fundamentals, while my Foolish colleague Alan Oscroft reckons it has got itself into a pretty good shape for the long term.
Man Group trades at a forecast valuation of 13.5 times earnings but the real attraction is its compelling forward yield, currently 6.5% with cover of 1.4. City analysts reckon earnings per share will fall 18% this calendar year then rise 27% in 2019. So the volatility looks set to continue. In my view the best time to buy volatile stocks is when they are down. Like now.
After a dismal week for global share prices the FTSE 100 was flirting with 7,000 until this morning’s rally, which has lifted it 0.49% to 7,041 at time of writing. Investors will be breathing a sigh of relief at the news, although there is doubtless more uncertainty to come.
Bulls and bears
Stock market bull runs do not die of old age, they normally need a trigger. Higher interest rates look like they could supply the bullet, or it could be the trade war, or Europe, or whatever. Nobody has a crystal ball, nobody knows.
All we know for sure is this. On May 22, the FTSE 100 hit 7,877. It is now 10% cheaper. That is what I call a buying opportunity. The index spreads your risk across 100 top UK companies that generate 77% of their revenues overseas, giving you massive global exposure, and a generous yield that stood at 4.01% at the end of September.
Buy and hold
The FTSE 100 is lower than it has been right now but it remains a global growth and income hero. You can invest in it at minimal cost through an ETF such as the iShares FTSE 100, which has ongoing charges of just 0.07% a year, so you get to keep more of the growth for yourself. Maybe buy a stake now, then buy some more in the next market dip. Then let those dividends roll up year after year while you wait for the market to recover. How long should you hold? To retirement and beyond!