The Standard Life (LSE: SLA) share price has charged ahead of the market over the past 12 months. Since the beginning of March last year, the stock has added 33%, excluding dividends. Over the same period, the FTSE 100 has added just 13%. That suggests an outperformance, excluding dividends, of 20%.
However, these figures only tell part of the story. Shares in the pension and wealth manager may have outperformed over the past 12 months, but the stock has lost 24% of its value over the past five years. The FTSE 100 has added 10% over the same time frame. Both of these figures exclude dividends paid to investors.
Nevertheless, despite this long-term underperformance, the outlook for the Standard Life share price seems to be looking up. And with that in mind, I’ve been taking a closer look at the stock to see if it could be worth adding to my portfolio.
Standard Life share price outlook
The financial services group has struggled over the past few years. In a world of low-interest rates, Standard Life has been fighting its competitors for market share. Against deep-pocketed competitors like Legal & General, the organisation has struggled.
Still, the group has made some progress. Under the stewardship of its new CEO Stephen Bird, the company has set out in a new direction. It agreed to sell its Standard Life brand to insurer Phoenix Group in February. This follows the sale of its European and UK insurance businesses to Phoenix in 2018.
Following these deals, the group’s operations will be focused on asset management. I think this is a sensible move. Standard has previously offered the kind of life insurance products that can be incredibly capital-intensive, which restricts the company’s ability to grow. In my opinion, by focusing on asset management, the group should have more flexibility.
According to its latest trading update, assets under management and administration fell by £10bn to £534.6bn for the year to the end of 2020. Fee-based revenue fell 13% to £1.4bn, largely from clients switching to lower-fee assets and a scheduled withdrawal of assets by Lloyds Banking Group. Overall, profit for the year fell 17%, and the company slashed its dividend as a result.
Standard plans to double down on its asset management business going forward. But the company’s 2020 results show the challenges the group faces. It faces an uphill struggle to attract customers from lower-fee competitors.
In the most optimistic scenario, if the firm can attract customers from competitors, profits could increase steadily over the next two years. This may lead to continued outperformance for the Standard Life share price. On the other hand, if outflows continue, the group’s stock may underperform.
Considering all of the above, I think this is a turnaround opportunity. As such, I wouldn’t buy the stock today. The way I see it, while Standard’s decision to streamline its business will help the company focus on growth, there are plenty of other competitors out there chasing the same market.
Therefore, I think the business may continue to face challenges, and its returns may lag the broader market.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.