Inevitably, there will be winners and losers from the fourth industrial revolution. And judging by the share price performance of these three stocks, investors have already made up their minds about who the losers might be. But could this be a potential buying opportunity?

Hazel’s here!

The St James’s Place (LSE:STJ) share price has come under pressure after Altruist, an online provider of services to investment advisors, launched Hazel, its new AI tax planning tool.

For up to $150 a month (large firms will pay more), the US company claims its new software will “transform your practice” with interactive scenario modelling. Although the tool itself is unlikely to directly impact St James’s Place, it raises questions as to what might follow.

In 2024, the wealth manager charged £1.089bn for investment advice, 34% of its total income. And even if its clients would rather rely on humans for advice, AI could open up the market to low-cost challengers.

The timing of the arrival of Hazel’s unfortunate. Over the course of 2025, the group’s assets under management increased by £29.8bn, helped by net inflows of £6.2bn and a 94.9% retention rate.

However, even though the stock’s trading close to its 52-week low, I don’t want to invest given the uncertainty.

What about Claude?

By contrast, I like the look of London Stock Exchange Group (LSE:LSEG). I think it remains a stock to consider even though its share price is coming under pressure from anxiety about how Anthropic’s AI-powered legal assistant, an add-on to its Claude platform, could impact data and software companies.

Again, the software itself isn’t a particular threat, but what’s coming down the line? However, I think AI could work to LSEG’s advantage. The technology requires data, which the group has in bucket loads. Its propriety data’s spread across five distinct operating divisions.

Elliott Management appears to agree with me. The Financial Times claims the activist investor has been building up a “significant” stake. The firm’s established a reputation for investing in underperforming companies.

LSEG’s shares are now trading at their lowest earnings multiple since the pandemic. And they’re changing hands for what they were in the first quarter of 2023. I think the stock offers good value and is worth considering.

And finally…

Another stock under the AI cosh is MONY Group (LSE:MONY), owner of a number of websites designed to save households cash, including MoneySupermarket. Its share price is now back to where it was in 2013.

It’s been affected by Insurify, another US company, releasing what it claims is the insurance industry’s first ChatGPT app. Drivers will be able to explore personalised quotes.

MONY Group’s vulnerable because, in 2024, it generated nearly 54% of its revenue from insurance referrals. Obtaining quotes though ChatGPT sounds appealing to me, especially if it avoids having to answer all those tedious questions that are usually asked.

The direction of travel is clear and I’m not sure what the group can do about it. For this reason, investing now would be too risky for me.

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Over this period, its nearest challenger for the top spot was Rolls-Royce Holdings, with an increase of 91%.

But then again…

However, this needs to be put into context.

In the two years to May 2024, the value of the group’s shares fell by more than 60%. They suffered on news that the Financial Conduct Authority (FCA) was investigating the charges imposed by the industry on clients.

To cover potential compensation, St James’s Place set aside £426m in its accounts. The final cost is unlikely to be known until 2026 at the earliest.

Over the summer, the group plans to implement its new fee structure, which it claims is “simple” and “comparable”. It’s also embarked on a significant cost-cutting exercise that’s expected to save a cumulative £500m by 2030.

Increased assets

Looking at the company’s share price performance, it looks as though investors believe it’s turned the corner.

Indeed, at 31 December 2024, it reported a record level of funds under management (FUM). Helped by its first-ever “national brand campaign”, FUM increased to £190.2bn.

However, it’s not immune from the current global economic uncertainty.

During the first three months of 2025, FUM fell to £188.6bn, although this was still 5.3% higher than a year earlier. But the reduction has more to do with a fall in asset values than a withdrawal of cash. In fact, during the quarter, there was a £1.69bn net inflow. And the group reported an increase – to 95% — in its retention rate of funds.

But there’s also an opportunity here. With a difficult macroeconomic environment, investors are more likely to seek out trusted financial advice from one of the group’s partners.

My opinion

To be honest, I’m surprised how well the share price has recovered following its steep decline. The FCA investigation has not yet concluded and I expected the company’s reputation to have taken more of a hit.

However, I think the recent share price rally will run out of steam soon.

The average 12-month price target of the 13 analysts covering the stock is 1,160p (range: 900p-1,400p). That’s only a 4% rise against today’s price.

And St James’s Place’s dividend is miserly. The total payout for 2024 will be 18p. Compared to 2023, that’s a 24% reduction and implies a current yield of 1.6%. For comparison, the FTSE 100’s offering 3.5%.

I also believe there are better opportunities to consider elsewhere in the financial services sector. I recently took a position in Legal & General due to its generous dividend and, in my opinion, encouraging growth prospects.

For these reasons, I don’t want to invest in St James’s Place.

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Strong returns

Believe it or not, the top performer in the index over the last year is wealth management firm St. James’s Place (LSE: STJ). It’s up about 132%, meaning that it has more than doubled investors’ money.

For context, the FTSE 100 itself is only up about 5% over the last 12 months. So, the stock has trounced the index.

I need to point out, however, that the share has come from a really low base. This time last year, it was very much out of favour and had just fallen from 1,700p to 400p – a huge decline.

And even after the 132% gain, it’s still well below where it was sitting at its highs. In other words, anyone who invested near the highs would still be under water.

But it shows that buying a stock when it’s really out of favour can potentially pay off. A gain of that size over 12 months is a fantastic return.

Further gains to come?

Could there be further big moves on the horizon here? Potentially.

The main reason the stock took such a big hit a few years ago is that the company was under investigation by the Financial Conduct Authority (FCA) for its fee structure (which was complex and high). However, it has recently been rolling out a new charging structure that’s designed to be more attractive (transparent and fair) to clients.

The company has also initiated a major cost savings drive. In July, it outlined a six-year plan to slash spend and achieve cumulative savings of close to £500m by 2030. These savings should help to boost earnings per share over time.

Meanwhile, recent updates from the company have been quite encouraging. For example, in January, the firm reported better-than-expected managed funds for 2024, driven by £4.3bn of yearly net inflows and high client engagement, a 95% retention rate.

As a result of all these positive developments, many brokers have been lifting their share price target for the stock. For instance, in February, analysts at Citigroup raised their target price from 1,010p to 1,280p, about 28% above the current share price.

Worth buying?

Is the stock worth considering then? I think so.

In the long run, I see plenty of growth potential here. I expect the wealth management industry to get bigger in the years ahead as people struggle with the complexities of the financial landscape and I reckon St. James’s Place will benefit.

As for the valuation, it looks attractive to me. Currently, the forward-looking price-to-earnings (P/E) ratio here is only 14.6.

Of course, there are plenty of risks to consider with this stock. Further regulatory intervention, a downturn in global financial markets, and a shift away from financial advisers are some examples.

All things considered, however, I like the look of this Footsie stock today.

The post The best-performing FTSE 100 stock over the last year is… appeared first on The Motley Fool UK.

Taking action

One catalyst that’s helped the stock to rally was the half-year results released at the end of July. It was the first real opportunity for the management team to express how they were planning on turning the business around.

In the report, it spoke of “an addressable cost base reduction programme”. This is anticipated to give cumulative net savings of around £500m through to 2030. The results also spoke about taking a chunk of these savings to invest for “strategic initiatives and underpinning long-term growth ambitions.”

These comments clearly helped to give investors more optimism about the future. Part of the issue for some firms is that the management team doesn’t accept there’s a problem. Therefore, things never change. Yet the fact that action’s being taken shows that the falling share price can be addressed.

Loyal client base

Another factor that makes me want to buy the stock is the type of clients the firm has. Despite all the problems over the past few years, the funds under management hit a new record at £181.9bn in H1 2024. This is up from the £168.2bn from the end of December 2023.

The more money from clients the company looks after, the more profitable it can become. Sure, the client advisers have to sell financial products in order to turn that money into revenue. But I’m impressed at how the company’s retained a lot of clients through a difficult period. Not only this, but it’s actually increased the funds being managed.

This shows me that clients do like the offer. Otherwise they would quickly move money elsewhere.

Caution needed

Despite these positive points, I do need to be mindful of the issues that got the company in a pickle in the first place. One of the major ones was the £426m compensation pot set up earlier this year for historical overcharging of client fees.

The fact that the systems and policies didn’t pick up on the correct fees that should have been charged is worrying. Of course, the firm’s addressing this issue. But it’s embarrassing that something like this was happening internally without it being picked up for a long time.

I’m seriously thinking about buying the stock for long-term gains and feel it represents one of the best potential growth options right now.

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Research has suggested that investing in the ‘dogs of the Dow‘ (the Dow Jones Industrial Average is the US equivalent of the FTSE 100 index) can be a rewarding strategy.

The theory is that these are large, established companies and often the price fall on bad news can understate that. On the other hand, it is rare for a share to perform worse than almost its entire peer group for no reason.

So how are last year’s three biggest dogs of the FTSE 100 performing so far in 2024?

Anglo American: up 4% in 2024

Mining giant Anglo American fell around 40% last year, worse than any other FTSE 100 share.

So far this year though, it has shown signs of turning things around. The share price has risen 4% since the turn of the year – a modest rise, but certainly far better than it managed in 2023.

While iron ore prices and sales fell in the first half compared to the same period last year, the company has benefitted from higher copper prices.

St James’s Place: 9% higher so far this year

Investment management firm St James’s Place (LSE: STJ) saw its own share price collapse last year, logging a 38% fall. But 2024 has been less alarming for the firm’s investors and the shares have moved up 9%.

Fresnillo: further 8% fall since January

Miner Fresnillo fell 34% last year, following the value of its core product: silver. It has continued to slide in 2024, falling 8% so far.

Revenues grew in the first half of the year compared to the same period last year, thanks mainly to higher gold and silver prices. Profits were up too.

The ongoing share price weakness partly reflects market nervousness about whether recent record high gold prices are here for a while, or just a flash in the pan.

Investing on strength – or weakness?

That trio of FTSE 100 dogs then, has put in a fairly underwhelming performance so far in 2024. Only St James’s Place has managed to beat the average FTSE 100 share price gain so far this year of 6%.

But that partly reflects just how far it had fallen beforehand. While the FTSE is up 12% over the past five years, the St James’s Place share price has tumbled 31%.

While it has performed better so far this year, I would have been nervous about investing in it at the end of last year (and did not). It felt like a turnaround situation due to upset customers, complaints of customer overcharging and a competitive positioning that makes it look ripe for cheaper competitors to try and attract clients.

In the first half, positive news included net inflows of cash. Assets under management hit a record.

I still see weakness in St James’s business model though, so have no plans to invest.

The post What happened to last year’s dogs of the FTSE 100? appeared first on The Motley Fool UK.

Shares in the major London-based financial firm are down 20% over the past year but lately, things are looking up. Since hitting a 10-year low on 16 April, the stock’s recovered a massive 74.6%!

Not everyone is so positive though. Four investment managers still have short positions open on the stock, including Marshall Wace and Millennium International.

So let’s take a look at the company’s books and figure out if it’s worth considering.

First, how did it get here? 

St James’s Place is the UK’s biggest provider of financial advice, serving 960,000 of the country’s wealthiest residents. So I can imagine it’s pretty embarrassing when the company’s own stock is struggling.

The past two and half years haven’t been kind with the share price down to £7 from a high of £16.83 at the end of 2021. At its lowest point in April, it had fallen 75%.

New consumer protection rules introduced by the Financial Conduct Authority last year took the firm by surprise. Suddenly, its exceptionally high fee structure was no longer considered acceptable.

Lack of transparency was also noted as an unfavourable factor. Couple this with increasingly popular robo-advisors and index-linked funds and suddenly the company’s entire business model was in danger.

The regulatory changes raised questions regarding the company’s compliance so it put aside £426m for potential customer refunds. Subsequent changes to the fee structure meant net inflows fell to £700m from £2bn the year prior, hurting the share price.

But a shakeup, restructuring and share buyback programme have put things back on track.

So is it heading for success?

Let’s take a look

St James’s Place’s balance sheet looks clean. With half a billion in debt, £1bn in equity and about £6bn in cash, it’s pretty solid. And with a £3.8bn market-cap dwarfed by £26.8bn in sales, its price-to-sales (P/S) ratio is minuscule, at 0.1 times. 

Earlier this year it became unprofitable, with earnings per share (EPS) slipping to a 1.8p per share loss. But now it’s back in the game with a record £181.9bn funds under management. In the latest first-half earnings results released last month, revenue increased and net income grew 2.2%. Profit margins are down to 1% from 2% due to all the regulation-related expenses but otherwise, it’s doing well.

The recent success is likely due to a £100m cost-cutting exercise and £32.9m share buyback programme announced in August. But CEO Mark Fitzpatrick says the company still has a lot of hard work ahead over the next 24 months. The long-term consequences of the cost-cutting are yet to be realised and could strain the share price.

Overall, the recovery’s impressive. There are still risks but with 3% more clients this year, people appear to be happy about the changes.

It might even come back stronger than ever. I like its chances, so I plan to buy the shares as soon as I have free capital this month.

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But after hitting a low of 402p on 16 April, it began a slow recovery. This recent jump means it’s finally recovered the losses, hitting a yearly high of 704p last Thursday.

So what prompted this incredible performance?

Stellar results

The firm’s H1 2024 results revealed record funds under management (FUM) of £182bn boosted by net inflows of £1.9bn. It also posted an IFRS profit after tax of £165m, a 2.2% increase from last year. Revenue increased 97% to £15.8bn but higher expenses slashed profit margins in half to 1%.

But more than just the results themselves, the firm has outlined an impressive recovery and cost-savings plan. It plans to cut £100m in expenses by 2027 with an aim to achieve cumulative net savings of around £500m by 2030. It hopes to reinvest approximately 50% of these savings back into the business.

A rather ambitious plan in my opinion, but one that’s seems to have caught the attention of brokers. Bank of America and UBS put in Buy ratings for the stock last week, followed by Overweight ratings from JP Morgan and Barclays.

Dividend cuts

Despite the good results, it also announced a decreased interim dividend of 6p per share. This is down from 15.8p last year. The full-year payout is yet to be confirmed but will likely be less than last year’s 23.8p — which was already down from 52.8p in 2022.

The yield is now down to 2% after starting the year around 8%.

However, the firm has also initiated a £32.9m share buyback programme. This will likely help to boost the final dividend. The ex-dividend date is 22 August, with payment on 20 September.

Ongoing issues

There are still lingering issues from the overcharging scandal that present risks to the stock. Earlier this year, St James’s Place put aside £426m for potential refunds to disgruntled customers. It’s also had to overhaul its charging structure, which may mean lower profits for the business. 

Cost-cutting exercises are a good start but only go so far if a company isn’t profitable. 

With earnings per share (EPS) now back up to 30p from a 1.2p loss, things are looking up. But the full costs of the overcharging scandal (both financial and reputational) remain to be seen. There’s still a lot of work to be done before the company is in the clear.

Growth potential?

Shareholders who bought the stock during the recent dip will be celebrating. But even for new investors, I think there’s still a lot of room for more growth. The price remains down by 59% from the December 2021 high of £16.83.

If it can claw back some customer confidence with the new cost structure, I think St James’s Place might just have a chance of reliving its glory days. But it’s a bit early to tell. I’m going on holiday this month and if the price is still above 680p when I return, I’ll consider buying the shares.

The post Up 22% in a week! Top brokers are tipping this beaten-down FTSE stock to recover appeared first on The Motley Fool UK.

And it got an extra kicking in February when the firm’s FY results update revealed overcharging complaints. It had to set aside £426m to deal with possible refunds.

But the share price has gradually come back up. And on 30 July, it spiked up 25% in morning trading. Here’s what’s happening.

New growth targets

It’s all down to an H1 results release from the financial services firm. But it’s not just the results that have generated the excitement. No, an extra boost came from new cost-cutting and recovery plans.

Gross inflows in the half rose from £8bn to £8.5bn. Net inflows of £1.9bn helped lift funds under management to a record of £182bn.

The firm posted an IFRS profit after tax of £165m, up a bit from £162m in H1 2023.

The interim dividend came in at 6p per share. But it’s being boosted by a £32.9m share buyback, effectively doubling the cash being returned.

The board expects total returns for 2024 to come in at the equivalent of 18p per share. That’s still well down from the 52.78p dividends paid in 2022 though.

The way ahead

But what about the future? The new plan aims to reach cost savings of £100m a year by 2027. After expected costs of £80m to implement, the board anticipates “cumulative net savings of approaching £500 million through to 2030”.

About half the achieved savings are marked for reinvestment back into the business, “supporting strategic initiatives and underpinning long-term growth ambitions”.

Those ambitions do seem to be bold. The company hopes to “double the underlying cash result from 2023 to 2030”.

What might that mean for the stock valuation?

Cheap as chips?

Prior to this latest news, broker forecasts had St James’s Place shares priced at just eight times forward earnings for 2024. That alone looks cheap, though it will take into account the possible outcomes of those customer complaints.

If a doubling of the company’s underlying cash result should lead to a similar boost to earnings per share (EPS), that could imply a price-to-earnings (P/E) multiple of only four by 2023.

A doubling like that might not work through all the way to EPS. And 2030’s still a very long way off from a financial perspective. There’s still plenty of time there for a repeat of the 2020 stock market crash and another recovery, for example.

Volatility ahead?

We still need to see how the new customer charging structures will work out. And how much effect it might all have on long-term profitability. And until we see some of the recovery promise turn into real profits and cash, I reckon the share price could remain volatile.

But St James’s Place has just climbed into my top 10 candidates for my next Stocks and Shares ISA buy.

The post The St James’s Place (STJ) share price just jumped 25%. Here’s what you need to know appeared first on The Motley Fool UK.

Customer complaints going via the Financial Conduct Authority (FCA) meant firm set aside £426m for potential refunds to clients who overpaid for fees and advice. And it slashed its dividend.

St James’s Place shares have reversed sharply since 2021, and are now down 60% in the past five years. But, are things set to get better?

First-quarter boost

On 30 April, we had an upbeat update for the quarter ended 31 March. It showed a rise in funds under management (FUM), to £179m, from £168m three months earlier.

CEO Mark FitzPatrick said: “This has primarily been driven through a strong period of investment returns, as our investment proposition continues to deliver for clients.“

So, it seems it’s really just a result of a rise in markets in the past few months. And we shouldn’t just assume the firm’s troubles are behind it and customers are rushing back.

We did see a net inflow too. But it was only a modest £0.71m. And gross inflows came in a bit behind the same quarter last year.

Turning point?

Still, any net inflow at this stage has to be a good sign. It does come at a time when investor confidence is improving by leaps and bounds, however. And against that background, I think some might be disappointed.

The share price barely moved in morning trading. So investors might perhaps not set too much store by this quarter. Not with the big threat of the client overcharging thing hanging over them.

There wasn’t much on that in this latest news, just a bit about “programmes of work to review historic client servicing records and to implement the new charging structure that we announced last October.“

Too cheap to ignore?

At this stage, I’m torn over whether St James’s Place could be a good investment.

I’d have thought that being forced to cut customer charges, and likely refund a big slice of cash, would ruin customer confidence. It still might do, but at this stage it does look like customers remain loyal.

I wouldn’t be loyal if a company I used owned up to having treated me wrongly and overcharged me. But that’s just me.

And if the customers stick around, the stock valuation could make it a buy now.

Valuation

Forecasts show a price-to-earnings (P/E) ratio of less than seven for 2024. That could rise close to eight by 2026, though, as analysts expect earnings per share (EPS) to dip a bit in the next few years.

But even under a tighter charging regime, that still wouldn’t look too stretching. And we have dividend yields of around 5% or so lined up too.

If the investigation brings no more pain than the sum already set aside, St James’s Place could be a nice investment now. Yet there’s still too much uncertainty for me.

The post Can this latest news help stop the St James’s Place share price rot? appeared first on The Motley Fool UK.

That’s the theory, and a seductive one. It doesn’t always work in practice though.

Two FTSE 100 stocks stand out for their dismal performance: luxury fashion house Burberry Group (LSE: BRBY) and financial advisory group St James’s Place (LSE: STJ).

Their shares crashed a thunderous 55.37% and 63.56%, respectively, over the last 12 months. They’re now a lot cheaper than they were, but cheap isn’t everything. At some point, they have to recover and there’s no guarantee of that. Just because a stock has fallen by more than half, doesn’t mean it can’t do it again.

Trouble in store

The luxury sector has been hit by today’s economic troubles. In January, Burberry issued a profit warning as sales fell by 5% in Europe, the Middle East, India, and Africa, and by 15% in the Americas.

The high-end fashion house now has a distinctly low-end valuation of just 9.46 times earnings (it was around 25 times for years). That tempts me. As does the dividend, with Burberry forecast to yield 4.46% in 2024 and 4.56% in 2025.

But can it bounce back? We will get a clearer idea on 15 May, when the company publishes preliminary results, but analysts are downbeat. Full-year sales could be even lower than we’ve been led to expect, while the outlook for 2025 isn’t great either.

I’m tempted, but I won’t buy it today. I suspect Burberry may struggle for a while longer, as the recovery is going to take time. I’ll be watching it closely, though.

The wrong place

The Burberry share price skipped the recent FTSE 100 rally but St James’s Place didn’t. It’s up 10.6% over the last month alone. But is that just a dead cat bounce?

St James’s Place was forced to slash customer charges and scrap exit fees after falling foul of the Financial Conduct Authority’s Consumer Duty rules. This turned a 2022 profit after tax of £407.2m into a loss of £9.9m in 2023. The board slashed the full-year dividend by more than half, from 52.78p per share to just 23.83p. 

The firm’s reputation has been sullied and deservedly so, in my view. Yet one of the features of the company is that its customers have remained loyal, and still reckon they’re getting a fair deal even if they’re not.

New CEO Mark FitzPatrick is hoping to hit the reset button and investors appear optimistic. But there’s still trouble ahead, as lower fees means lower earnings. St James’s Place also faces a £426m complaints provision.

Again, the shares look cheap trading at 6.88 times forecast earnings, while the 2024 yield of 4.05% is expected to hit 5.22% in 2025. With net cash of £6.44bn, it’s financially solid even though it’s on course to fall out of the FTSE 100.

Yet I question how it can drive earnings back up with the FCA breathing down its neck. As an investor myself, I just don’t like St James’s Place on principle. I can see lots of FTSE 100 shares I’d much rather buy today.

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