Positioned well for future growth
Today’s interim management statement from asset manager Schroders (LSE: SDR) shows that the company is making encouraging progress in an uncertain market. It was able to increase assets under management from £313.5bn to £324.9bn, with that figure being boosted by net inflows of £2.7bn, as well as investment returns of £8.7bn during the period.
Although pre-tax profit fell from £142m in the first three months of last year to £138m in the first quarter of the current year, Schroders’ diversified business model positions the company well for future growth even in what is likely to be an uncertain period, with the EU referendum having the potential to cause high volatility in the short run.
With Schroders forecast to increase its bottom line by 7% next year and its shares having a price to earnings (P/E) ratio of just 14.8, it seems to offer good value for money given its excellent track record of growth. Therefore, while its short term performance has the potential to disappoint, Schroders remains a sound long term buy.
A wide margin of safety
Also reporting today was gold miner Petropavlovsk (LSE: POG), which confirmed production guidance for the full-year of 460,000–500,000 ounces of gold. This would be slightly down on 2015’s production of 504,100 ounces and reflects the company’s focus on cost reduction and operational efficiencies. Still, Petropavlovsk expects to deliver a 10-20% annual rise in production between 2017 and 2020 which, when combined with a fall in costs, could mean a sustained rise in profitability over the medium to long term.
As well as a production update, Petropavlovsk also announced the acquisition of Amur Zoloto, a Russian gold mining company, for $144m. It will be paid for out of the issuance of new shares and with Petropavlovsk also announcing a joint venture with LLC GMD Gold to finance the completion of the construction and commissioning of the company’s pressure oxidation hub project, it seems to be making strong progress.
With Petropavlovsk trading on a P/E ratio of just 4.8, it seems to offer a wide margin of safety — especially while the prospects for the gold price are so positive. Therefore, it seems to be a worthy purchase for less risk-averse investors.
Meanwhile, shares in gold miner Avocet (LSE: AVM) have soared by over 40% today after it released a positive first quarter production update. Total gold production at Inata was 20,528 ounces at a cash cost of $925 per ounce. This is up from 17,379 ounces produced in the fourth quarter of last year, with costs falling from that quarter’s $1,094 per ounce. This rise in production and fall in costs is clearly positive news and has caused investor sentiment to rapidly rise.
Production in the first quarter benefitted from a period of treating cleaner ores, which enabled higher recoveries to be achieved. Throughput also improved, with 544k tonnes processed in the quarter versus 509k tonnes in the previous quarter. And with production from Inata in 2016 expected to be between 75,000 and 85,000 ounces, the company’s medium term prospects appear to be upbeat. Therefore, for investors with a higher tolerance of risk, Avocet could be worth a closer look.
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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.