Buy asset managers to ride the bull market
Few sectors benefit as directly from the rise in the stock market as asset managers. Unsurprisingly, a bull market tends to lead to a greater amount of assets under management (AUM) and, therefore, greater profits for companies that manage client portfolios. Several scholarship experts and contributors to MoneyShow.com showcase their best ideas in the asset management space.
Michael brush, Refresh stocks
Asset management Artisan Partners
Artisan has a collection of very strong equity and debt mutual funds with good records. I interviewed several of their fund managers, because of their good results.
Founded in 1994, Artisan claims that it attracts and retains talent in the investment industry by providing transparent and decent financial incentives and a high degree of autonomy. He says this autonomous investment team structure promotes independent analysis and accountability, which improves investment results.
The company claims that since its inception in 1994, it has generated $ 31 billion in higher returns on investment than clients would have gotten in the relative benchmark, the passive indices.
Since their creation, 16 of the 17 strategies launched before 2020 have added value compared to their benchmarks, after fees. Twelve strategies have outperformed by more than 300 basis points per year on average since their launch after fees.
This performance explains why APAM attracts investors even though many people prefer ETFs to actively managed funds. Assets under management increased to $ 162.9 billion in the quarter ending March 31, 2021, from $ 95 billion at the end of the same quarter a year ago. Assets under management increased 3% sequentially, resulting in $ 3.7 billion in returns on investment and $ 1.4 billion in net customer cash inflows.
Revenue of $ 290.7 million in the March 2021 quarter increased 11% sequentially. However, the operating margin fell, sequentially, to 41.9% from 43.5%. Revenue jumped 43% in the March 2020 quarter.
Insider buys at Artisan Partners were pretty big at $ 5 million, and it happened at $ 51. This should be the conservative buy limit, although I suggest buying here and adding weakness. I bought around current levels.
Westwood Holdings (WHG) is another asset manager for yield fans. The stock pays a dividend yield of 2.2%. And unlike the classic defensive dividend names that I am avoiding at the moment, WHG offers the potential for capital appreciation as it is a cyclical given the exposure to the stock market.
Based in Dallas and founded in 1983, Westwood provides investment advisory services to institutional investors, a family of mutual funds called Westwood Funds, and other mutual funds. Westwood Management and Westwood Trust managed approximately $ 14.5 billion at the end of the first quarter, up from $ 13 billion at the end of the fourth quarter.
First quarter net inflows greater than $ 500 million. Westwood reported sales of $ 18.3 million in the first quarter, up from $ 17.1 million in the fourth quarter and $ 16.7 million a year ago. It posted net income of $ 4.1 million in the first quarter compared to $ 2.8 million in the fourth quarter, mainly due to higher income and realized gains on private placements.
The company says it has cut spending, in part by subletting some of its excess office space in Dallas. Mario Gabelli occupies a position of 6.9% here, which I consider to be positive.
Insider buys happened at $ 17.89. Consider buying now and adding weakness to this level. The purchase was sizable at $ 447,325. In addition to the dividend, the company buys back large amounts of shares. I own shares of Westwood Holdings.
Todd razor, The Bull Market Report
The Carlyle Group (CG
This massive asset management company made $ 6.4 billion in revenue in the quarter, up from $ 4.5 billion a year ago. Almost 60% of this revenue came from the exit activity of Carlyle’s private equity buyout funds. The stock market rally allowed the company to offload its holdings in many portfolio companies.
The company’s distributable income, a key performance indicator among publicly traded private equity firms, was $ 215 million, a 23% increase year-over-year, compared to $ 175 over the same period last year.
During the quarter, Carlyle saw 13% growth in management assets, driven by the fund’s performance, as well as an additional $ 7.8 billion in new inflows for its new global buyout and credit funds.
The company generates income from management fees, based on the total assets under management of its funds, as well as through performance fees and accrued interest, depending on the performance of the funds. So the more they have under management, the higher the level of fees.
The Carlyle Group has gained over 95% in the past year, but we’re sure there is still huge upside potential for this stock, and it’s on track to hit our target price of $ 44. We continue to like this stock for the long haul.
Brett owens, Hidden returns
Jefferies Financial Group
(JEF) sold its efforts to focus solely on financial services. With all the money lying around, this industry is a great place. The investment bank is the bread and butter of the business. Jefferies is one of the biggest mergers and acquisitions (M&A) players that most investors have never heard of.
Investment bankers take a percentage reduction in the purchase or offer price. They strike money when the markets are hot. While competitors Goldman Sachs
Jefferies has been around for decades and has grown its business dramatically through booms and busts. Over the years, he has increased his income by almost 20% per year. Last year’s results were surprisingly strong given the circumstances.
Jefferies’ renewed focus boosted its profitability. Five years ago, the company had a negative return on equity (ROE). This means that every dollar invested in itself has lost money. Not good!
Today, its ROE stands at a (much) more respectable 13.2%. This is more in line with the lifetime return of our high yield portfolio (which is perched at 14% + per year). Looking ahead, this stock is a double dividend that awaits. There are two reasons for this.
First, Jefferies has tripled its payout in the past five years, but its stock price is just starting to catch up. It would be necessary to overtake from here, more certain, to come from behind.
Second, the company buys back a load of shares every year. Since 2016, Jefferies has reduced its float by almost a third! These types of redemptions are the giveaway that keeps on giving because they extract everything on a “per share” basis, including the dividend.
This cash cow’s shareholder returns will only improve as transactions heat up. More mergers and acquisitions means more dividends, buyouts and price gains for us. This stock is the purest payment game on Fed Powell Chairman’s money printing. Buy Jefferies up to $ 40.
Mike Cintolo, Cabot Top Ten Trader
(BX) is one of the kings of the bull market, with huge stakes in real estate and private equity (each about a third of total assets under management), credit and insurance (24%) and hedge fund solutions – as asset prices lift, as does Blackstone’s value and cash flow. But there are two other pie pieces that are appealing here.
First, a few years ago the company became a C-corp .; No more messy K-1s, replaced by 1099s and qualified dividends, making the stock more attractive to more funds.
Second, Blackstone itself has moved to a fee-based model, which leads to much greater stability and earnings (and dividend) growth, instead of depending on windfall profits from asset sales.
It’s all paying off today – in the first quarter, the company’s fee-based earnings per share jumped to $ 2.20 for the past year, from $ 1.57 a year ago, while the Total distributable profit more than doubled (thanks in part to easy comparisons).
And that reliability leads to solid returns for shareholders (a quarterly dividend of 82 cents per share was paid on May 10; $ 2.69 per share in the past year), although the payouts are variable. There are a lot of moving parts here, but the general idea is easy to understand as the bull market continues.
Like many stocks, BX topped early last year, collapsed, recovered, then meandered through October before stepping into high gear on vaccine news. And the action since then has been smooth and superb, with just one shakeout (early March, with the market) along the way. More recently, BX has rebounded off its 25 day line and moved to new highs with decent volume. If you wish, we prefer to play pullbacks.