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The Standard Life share price is up 34% in 6 months. Should I buy now?

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UK stocks have taken a hit over the last year with the impact of the pandemic, but many have recovered recently as part of a stock market rally. Whether this rally can be sustained or is part of a bubble is up for debate, but I still see opportunities in the market at the moment.

During turbulent times, I tend to look towards companies with a long and stable history of weathering difficult economic conditions. There are few in the FTSE 100 that have been around as long as Standard Life Aberdeen (LSE:SLA).

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The Standard Life share price is now 34% higher than it was six months ago. While the shares have only gained 1% in 12 months, given the overall state of the Footsie during that time the shares’ performance is better than average.

So would I buy Standard Life shares today for my portfolio?

Strong and stable

Standard Life has been around a long time. The company was first founded in 1825 and provides asset management, insurance, and savings services to both individuals and corporate bodies.

Historically speaking, the company has not provided great long-term returns for investors. The share price has returned a loss over the last five years despite its recent rally. Investors don’t seem to have been convinced by the 2017 merger between Standard Life and Aberdeen Asset Management.

Costs and competition have both been rising over the last number of years, which haven’t exactly helped the company’s bottom line. Profits for the company’s first half last year were 30% lower than the year before.

So what has been driving the Standard Life share price higher in recent months?

Broker action

One reason could be that analysts at both JP Morgan and Berenberg upgraded their broker recommendations for the company. JP Morgan said there were several opportunities to close the ‘value gap’ between Standard Life and its competitors, including a reduction in dividends. The company currently has one of the highest dividend yields in the FTSE 100 at roughly 7%.

Berenberg analysts also recommended a dividend cut so the company can focus on earnings growth, while upgrading the stock to ‘buy’ from ‘hold’.

Important decisions will need to be made by new CEO Stephen Bird. Standard Life clearly needs to focus more on growth, but cutting the dividend could put off potential investors as well. How the new management deals with that dilemma will have an impact on the share price going forward.

There is the potential for mergers and acquisitions to fuel growth, and management has indicated that it will consider this option.

That said, I will need more convincing of the company’s ability to drive the share price higher in the long term. A key metric for Standard Life is assets under management, which has been falling for some time. Its most recent earnings report had their assets under management at £511bn.

Until this heads in the right direction I won’t be buying the Standard Life share price for my portfolio.

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conorcoyle has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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