Abrdn (LSE:ABDN) stock has not been kind to its holders over the past year. In fact, the global investment company — headquartered in Edinburgh, not Aberdeen as the name suggests — is down a whopping 52% over the past 12 months.
So, let’s explore this company’s fortunes and see whether it’s right for my portfolio.
The Abrdn share price rose 8% on Wednesday morning after the asset manager announced a £300m share buyback programme as it looks to return excess capital to shareholders.
The firm said that first phase will begin with a £150m buyback, being carried out by Goldman Sachs. It announced that the purchase of shares will take place from 6 July and end no later than 30 December.
This will come as a welcome boost to shareholders who have seen the value of their holdings continually decline over the year.
Tanking share price
Prior to today’s gains, as I mentioned, the firm’s share price had declined considerably over the past year.
Concerns have been raised about the asset manager’s capacity to grow in the current environment. Redemptions — a metric that describes the difference between money that is flowing into funds (net inflow) and money that is flowing out (net outflows) — have been core to this.
Net redemptions continue to be an area of concern, and while they have slowed from £29bn in 2020, outflows remained high at £6.2bn in 2021.
Abrdn has been continually downgraded by brokers this year as well. It was recently downgraded by Credit Suisse, which said sentiment indicators remained negative.
The bank highlighted that Abrdn may struggle to attract new clients, but pointed to the recent acquisition of Interactive Investor as a way to increase inflows.
There are also concerns that negative economic forecasts may impact future capital inflows. Meanwhile, a poor-performing market will probably translate into less fee-based revenue and a lower value of assets under management.
Reasons to buy
Despite the bad year and bleak forecast, I’m pretty optimistic on Abrdn. I’ve already bought shares, but would buy more at the current price.
It current has a price-to-earnings ratio of 10, which is fair, and recent performance has been positive. In 2021, adjusted operating profit increased to £323m from £219m in the previous year. Fee-based revenue also rose to £1,515m from £1,425m.
The firm also has a strong brand and reputation that should continue to attract customers in the long run. Right now, the market looks tough, but eventually, things will improve and people will have more money to invest.
So, despite today’s 8% jump, I’d still buy Abrdn stock and hold it for the long term.