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Three Ways To Play A Santa Rally: Aberdeen Asset Management plc, Hargreaves Lansdown PLC & Schroders plc

There are still 50 days until Christmas, which means there is plenty of time for  the traditional stock market Santa rally. When stock markets are of good cheer, the share prices of fund managers and financial advisers typically share in the fun.

If you are in a festive mood, the following three financial stocks could all give you a seasonal lift.

Aberdeen Sleighed

Investors in fund manager Aberdeen Asset Management (LSE: ADN) certainly need a reason to feel jolly right now. At today’s 349p it is well below its 52-week high of 509p, as trouble in China weighs heavily on this Asia-focused investment house.

It’s enjoyed an early seasonal lift, rebounding 17% over the last month amid rumours of a buyer for the troubled business — rumours that Aberdeen has vigorously denied. Personally, I never like buying on takeover talk, which all too often comes to nought. Without a buyer, Aberdeen has a battle on its hands, suffering large-scale outflows from disappointed investors and a forecast 12% drop in earnings per share (EPS) in the year to next September. Compare that to the 43% rise Aberdeen enjoyed just five years ago.

If you think the China crisis has been overdone and a bit more stimulus could put things right, today’s heady valuation price of 10.74 times earnings and juicy 5.14% yield could prove a tasty Christmas treat. If a buyer does emerge, that would be icing on the cake.

Happy Hargreaves

The last five years have been one unbroken line of success for advisory group Hargreaves Lansdown (LSE: HL) — its share price is up 200% in that time. This is a company that has shown time and again that it understands the retail investment marketplace more than anybody else. It also knows how to make money out of it, while convincing customers that they are getting a good deal. Which, by and large, they are.

The downside of this runaway success is that Hargreaves Lansdown is now trading at 43 times earnings and yields a meagre 1.5%. Can it continue to deliver the explosive growth needed to justify those numbers? A forecast 18% rise in EPS in the year to next March suggests it can. It is still piling on new clients, with 24,000 added in the third quarter, bringing its total client base to 760,000. Revenue rose 11% to £78.5m. Christmas has already come at Hargreaves Lansdown, but I wouldn’t rule out further seasonal cheer.

Schroders Sings

Asset manager Schroders (LSE: SDR) is due a Santa rally, after falling 7.5% over the last six months. Its cause will be helped by today’s strong third quarter results, which saw pre-tax profits rise 16% to £404.4 million, despite a £27m currency headwind from stronger sterling.

Net inflows of £7bn over the nine months to 30 September have taken total assets under management to £276bn, a good performance given stock market volatility. Schroders also boasts a significant pipeline of new institutional business that has not yet been funded. It has delivered 90% growth over the last three years, trouncing the FTSE 100, which returned just 9.3% over the same period. 

Schroders, which can trace its history back to 1804, looks to be a steady, well-run business and is priced accordingly at 18 times earnings. The 2.56% yield is solid and reassuringly covered 2.1 times. Forecast EPS growth is low single digits. Operating margins are somewhat more dramatic at 26% and forecast to hit 36% shortly. This stock isn’t just for Christmas.

With the FTSE 100 sagging in recent weeks this could be this a great entry point for people looking to build long-term wealth. Some shares.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Aberdeen Asset Management and Hargreaves Lansdown. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.