Is this the top of the market for these finance stocks?

Financial stocks are in the money right now but Harvey Jones warns it may not last.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

A rising tide lifts all boats and these three investment-related stocks have all been lifted by rising FTSE 100 fortunes. But could the tide be set to turn?

Aberdeen Asset Management

After a disastrous 2015, when Aberdeen Asset Management (LSE: ADN) saw its share price halve from around 500p to 250p, investors were due a reprieve. Aberdeen was hit hard by the slowdown in its chosen specialist region of emerging markets, as disgruntled investors headed for the exits in search of more rewarding pastures. Worryingly, net fund outflows have continued in 2016, with £8.9bn bolting in the third quarter. But the good news this time round is that the losses have been more than offset by £17.5bn in asset appreciation. Assets under management duly totalled £301.4bn in June, up from £292.8bn three months earlier.

Fund outflows are slowing as investors recapture their faith in emerging markets, as anybody who understands that investments go in cycles would have expected. But the tide has really turned in favour of Aberdeen since Brexit, and the stock is up 22% in the past three months. Sterling weakness has boosted the value of its overseas assets under management, and as the pound plumbs new depths, the next quarterly figure will make interesting reading. Despite its resurgence, Aberdeen still trades at just 11.03 times earnings and yields 5.73%. So the valuation doesn’t look toppy, even if the stock market does.

Schroders

Asset management group Schroders (LSE: SDR) also fell sharply after the last stock market peak in April 2015, hit by falling profits and a sharp slowdown in first-half net inflows, from £8.8bn to just £0.7bn year-on-year. In July, chief executive Peter Harrison blamed the Brexit vote for the company’s short-term slips and warned of a further hit to investment demand. Well, he got that wrong, didn’t he? Brexit has come charging to the rescue, with markets surging on the back of fresh monetary stimulus and the falling pound.

The Schroders share price is up 21% in the last three months, echoing Aberdeen’s figure, further evidence that stock market trends are driving performance rather than individual company news. Schroder’s struggles when the pound is strong and will cash in on current weakness. Its stock is more expensive than Aberdeen however, trading at 15.85 times earnings and yielding just 3.11%. 

St James’s Place

Wealth manager St James’s Place (LSE: STJ) has had a great Brexit, its share price soaring 28% in the last three months. Not that it needed this artificial booster as it’s up 200% over the past five years. The advisory group reported record inflows of £5.3bn in July, up from £4.4bn one year earlier, lifting total group funds under management from £55.5bn to £65.6bn on the year. The group grew strongly despite recent market turbulence, with adviser numbers, profits and just about everything else rising sharply.

The post-referendum market surge has floated its boat but before you get too excited beware its pricey valuation of 24.35 times earnings, with a relatively lowly yield of 2.88%. At this price, St James’s may no longer be the Place to be.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »