Should I Buy Aberdeen Asset Management plc?

I’m out shopping for shares again. Should I add Aberdeen Asset Management (LSE: ADN)) to my wishlist?

Northern star

Aberdeen Asset Management is one stock I really wish I held. Last time I looked at it, back in January, its share price had risen a mighty 70% in 12 months to £3.77, roughly 10 times the growth on the FTSE 100. Trading at 14.8 times earnings, it still wasn’t that overvalued. But I decided that with stock markets looking gawky after their growth spurt, it wasn’t the time to buy. Subsequent events suggest I was right, with a sharp share price fall in May. Is this a buying opportunity?

Aberdeen anguish

What goes up, goes down. After peaking at £4.90 in late May, Aberdeen plunged. It has since fallen 22% to £3.80, against a more modest 5.5% on drop on the FTSE 100. Fund managers have always been a geared play on the stock market. Its September trading update was a tad disappointing. Assets under management dipped from £209.6bn to £201.7bn in the two months to 31 August. Its funds also suffered net outflows of £1.2bn in that period, on top of a £3.4bn outflow in the quarter before. Market volatility was the prime culprit.

Aberdeen still attracted £7bn of gross new business in just two months, against £1.2bn of net outflows. It has also received £130m worth of commitments for a proposed new property fund, underlining investor confidence in the company. Chief executive Martin Gilbert said “assets under management, balance sheet and profitability remain robust despite continuing market volatility”, and argued that emerging markets’ structural growth potential remains unchallenged. It expects full financial year profits to hit the top end of analysts’ forecasts of between £431m and £477m.

A bull and bear story

Trading at 15.3 times earnings, Aberdeen is slightly pricier than the FTSE 100 average of 14.65 times earnings. It offers less income, with a 3.1% yield against 3.65% for the index. But this is a good company, that I would expect to grow strongly when markets rebound. If you reckon current market uncertainty will soon pass, and the next bull market is round the corner, Aberdeen looks like a good way to accelerate your returns.

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> Harvey doesn't own any shares mentioned in this article