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Investing in Asset Managers – Forbes

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A strong stock market has been a boon to investment banks and asset managers, while rising affluence and an aging population remain long-term tailwinds for the group. Notably, many experts believe the group will be a prime beneficiary should interest rates rise.

Ten leading advisors suggest putting some of your investment assets into the shares of asset management stocks.

 

John Buckingham, The Prudent Speculator

As value investors, we are bullish on Goldman Sachs; the firm boasts a “best-in-class franchise” with premier market positioning across numerous business lines.

 The Wall Street titan posted revenue for the latest quarter of $7.88 billion besting the forecast of $7.54 billion and adjusted EPS of $3.95, outpacing expectations of $3.43.

Like many, we remain disappointed with Goldman’s weakness in fixed income, currency and commodities unit.

Nevertheless, we continue to think that GS is a top-tier player in its competitive space and expect the firm make the necessary corrections to bounce back and regain investor confidence.

Nevertheless, we continue to think that GS is a top-tier player in its competitive space and expect the firm make the necessary corrections to bounce back and regain investor confidence.

Goldman maintains strong capital ratios and liquidity. We view current levels as a long-term opportunity to establish or increase a position in the stock.

Goldman Sachs Group Inc. booth on the floor of the New York Stock Exchange in New York, May 30, 2017. (Photo by Michael Nagle/Bloomberg)

George Putnam, The Turnaround Letter

I see turnaround potential in Oaktree Capital Group, an investment management firm that focuses on alternative strategies.

Oaktree is known for its contrarian approach with many of its products concentrating on distressed assets and turnaround situations. It also holds a 20% stake in DoubleLine Capital, the well-known bond manager with over $100 billion in assets.

As the corporate debt binge that we’ve experienced since 2009 comes to an end, Oaktree will benefit from a growing number of restructurings and bankruptcies.

While waiting to participate in the substantial value that the firm can realize over time, investors are nicely compensated with the stock’s generous dividend yield.

Ameriprise Financial Inc. signage displayed outside of the company’s headquarters in Minneapolis, Minnesota, Dec. 28, 2011.  (Photo by Ariana Lindquist/Bloomberg)

Ben Reynolds, Sure Dividend

Ameriprise Financial is a U.S. financial planning leader with more than $800 billion of assets under management.

The company manages 112 mutual funds through a network of more than 9,000 advisors, delivers comprehensive financial planning services to 2+ million customers.

Its competitive advantage comes from its brand recognition and the strong performance of its funds. The affluent are likely to work with Ameriprise because of its reputation and prestige. The company is growing quickly and the current price is an attractive entry point.

Roy Ward, Cabot Benjamin Graham Value Investor

Stifel Financial, founded back in 1890, is a value-oriented buy. Its Stifel Nicolaus unit is a full-service brokerage and investment banking firm; its Thomas Weisel Partners unit is a growth focused investment banker.

In recent years, the company purchased Keefe, Bruyette & Woods in 2013, Sterne Agee in 2015, Barclay’s U.S. Wealth Management division in 2015, and Eaton Partners in 2016.

Stifel shares sell at 16.3 times current EPS, and the company maintains a solid balance sheet. Net current asset value per share is $25.02, which indicates SF shares are totally undervalued. My price target is $66.93 within two years. Buy at $45.65 or below.

Morgan Stanley signage is displayed on a monitor on the floor of the New York Stock Exchange in New York, on Feb. 24, 2017.  (Photo by Michael Nagle/Bloomberg)

Jim Powell, Global Changes & Opportunities Report

I think the most attractive big investment bank right now is Morgan Stanley. Unlike its rivals, Morgan Stanley outperformed its second quarter earnings estimates in all its divisions—and set records in wealth management, one of the brightest stars in global banking today.

What sets Morgan Stanley apart from its rivals is the company’s management made faster, and better, changes to the bank’s operations to benefit from the new trends in financial services.

Morgan Stanley took a hit from mid-2015 to early 2016 — as did most other banks. However, MS recovered faster than the others and is still moving up. I think Morgan Stanley will be a good performer for long-term investors.

John Reese, Validea

Evercore Partners, an investment banking advisory and management company, is in our “Hot List” portfolio based on meeting the investing criteria of the legendary investor Martin Zweig.

The stock’s p/e of 17.6 and its sales growth rate both pass the Zweig criteria, notes Reese. In addition, Evercore’s revenue growth is 22.2%, while its earnings growth rate is 31.5%.

Further, the stock’s long-term growth rate of 31%, based on the average of the 3, 4 and 5 year historical EPS growth rates, passes the tests required by the Zweig-based investment model.

Gordon Pape, The Internet Wealth Builder

JPMorgan Chase & Co. is a leading global financial services firm with assets of $2.5 trillion and operations worldwide.

The company reported record quarterly revenue of $7 billion ($1.82 per share) on revenue of $25.5 billion. Both numbers exceeded analysts’ expectations.

There’s no doubt JPM is performing well. Second-quarter earnings per share were up 17.4% from the same period in 2016 while return on common equity improved to 12% from 10% a year ago.

Assets under management reached a new record at $1.9 trillion, up 11%. Tier 1 common equity was 12.5%. The stock remains a Buy for income and long-term growth.

Bryan Perry, Cash Machine

Blackstone Group LP offers alternative asset management and raises capital for, invests in, and manages various investment vehicles, including private equity, real estate and hedge funds.

Blackstone’s revenue and earnings vary wildly from quarter to quarter, depending on gains and losses from asset sales and fees earned.

At 13.0 times current earnings with a PEG ratio of 0.75, BX shares are clearly undervalued. Blackstone’s dividend yield stands at 6.1%, which is very attractive.

Earnings will receive an additional boost if interest rates rise, inflation increases or financial regulations are eased by the Trump administration.

Blackstone is a limited partnership and passes income, gains and losses through to investors. The income, gains and losses are reported on IRS Schedule K-1 sent to investors after each year-end. Blackstone’s K-1 is complicated and may require that you seek tax help if you buy BX shares.

 

Chuck Carlson, DRIP Investor

It’s estimated that 10,000 baby boomers retire every day. The market is huge for people who need retirement financial advice.

One firm that is aiming to meet that need is Principal Financial Group (PFG), which has some $620 billion in assets under management.

The firm has consistently beaten Wall Street’s expectations, and analysts have been boosting their earnings estimates for the company. The dividend yield of 2.9% provides a nice kicker to total-return potential.

The stock has the characteristics of a “Steady Eddie” performer — not a stock that will be at the top of the leaderboard in any given year, but one that he believes will generate nice, steady total returns over the long term.