The Brewin Dolphin Holdings (LSE: BRW) share price soared by 60% on Thursday, leading the FTSE 250. But it was only one of three shares with double-digit jumps during morning trading.
The reason for the Brewin Dolphin spike is straightforward enough. On the day, the investment manager announced it has agreed a takeover.
RBC Wealth Management (Jersey) Holdings Limited made an offer of 515p per share to acquire the whole company, and the Brewin Dolphin board has recommended it. That’s 62% above Wednesday’s closing price, and values the company at approximately £1.6bn.
It’s perhaps too late to for investors to benefit now, but I do think we can still gain indirectly from what’s happened. I have had my eye on the investment management business for a while now, thinking that some of the top companies are undervalued.
The Brewin Dolphin sale helps reinforce my take on the sector, and it might just spur me into action. It’s also a reminder that a takeover at a handsome premium is one way that the value of a cheap stock can find its way out and reward patient investors.
Another FTSE 250 winner
Shares in Trainline (LSE: TRN) jumped 21% Thursday morning, the second biggest FTSE 250 winner by the time of writing.
That’s welcome news for Trainline shareholders, who have seen the value of their stock plunge. Even after Thursday’s rise, it’s still down 48% over the past 12 months. So what’s happened?
Trainline and others have been in negotiations with the Rail Delivery Group, under pressure to lower commission rates. On Thursday, the company revealed it has agreed a cut that, combined with a fall in costs, will result in a 0.25% reduction.
That’s effectively only a backstop. If the ticketing companies cannot agree contractual terms, it will come into force. So it effectively caps commission rate reductions, and eliminates some troubling uncertainty facing the company.
The regulated nature of the business has kept me away. But one upside is that it often results in a more predictable outlook for a company’s business. I need to investigate further.
Another investment manager
The third FTSE 250 stock to climb by double digits Thursday morning is Rathbone Brothers (LSE: RAT), up 12%. Rathbone provides “individual investment and wealth management services for private clients, charities, trustees and professional partners“. So it’s another investment manager, just like Brewin Dolphin.
It seems others have an eye on this sector too.
The Rathbone share price has been flat over the past 12 months. And it’s down 18% over five years, so am I looking at good value here? I think I might be.
Rathbone’s earnings have been solid for the past few years. And it’s been lifting its progressive dividend. For 2021, it yielded a well-covered 4.1%.
On 2021 earnings, the shares are on a price-to-earnings multiple of a little over 11, which seems cheap to me at first look. But I need to do some more research before I consider buying this FTSE 250 stock. And future economic pressures could hurt the investment business. Still, it’s on my radar now.
