Growth or retirement
Affiliated Managers Group (AMG) stock has returned 10% over the past three months. The company doesn’t declare dividends. Its strategy is to redeploy its profits in new affiliates, repay debt to reduce leverage, and buy back shares at fair value. The only source of return for AMG investors is capital profits in the equity. AMG has expanded its assets under management by 6% over the past five years. The diversification of its funds in equity, debt, and alternatives provides a good option to investors seeking returns above the index returns over a long period.
Affiliated Managers Group reported strong numbers in 1Q15 compared to mutual funds as well as ETFs like Franklin Resources (BEN), Federated Investors (FII), BlackRock (BLK), T. Rowe Price Group (TROW), Vanguard, American Funds, State Street (STT), Legg Mason (LM), Morgan Stanley (MS), Goldman Sachs (GS), Invesco (IVZ), and Janus Capital (JNS). Together, these companies form 9.27% of the Financial Select Sector SPDR Fund (XLF).
AMG is valued at 16x on a one-year forward price-to-earnings ratio, compared to 15.8x for its peers. Asset managers have reported good numbers for the first quarter of 2015, backed by strong market performance domestically as well as globally. Companies with a diversified asset base will have an edge over the local players, as the global markets—especially Europe and emerging markets—are in full swing compared to US equities. AMG can increase its focus on international assets by selecting boutiques offering these options.