What Caused Affiliated Managers’ Valuation to Fall?


Dec. 4 2020, Updated 10:53 a.m. ET


Affiliated Managers Group’s (AMG) stock fell by 10% over the past one-year period mainly due to an overall fall in global equities. The company doesn’t declare dividends. Its strategy is to redeploy its profits in new affiliates, repay the debt to reduce leverage, and buy back shares at a fair value. The only source of return for AMG’s investors is capital profits in the equity. The diversification of its funds in equity, debt, and alternatives provides an option to investors seeking returns above the index returns over a long period.

In 3Q15, Affiliated Managers repurchased $53 million worth of its own stock, bringing the total in 2015 to $332 million. The company’s policy is to repurchase the shares that are equivalent to 50% of its expected net income in a given year. Its competitors had the following dividend yields:

  • BlackRock (BLK) had 1.5%
  • T. Rowe Price (TROW) had 2.8%
  • Bank of New York Mellon (BK) had 2.7%

Together, these companies form 0.66% of the SPDR S&P 500 ETF (SPY).

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Guidance for 2015

Affiliated Managers expects economic EPS (earnings per share) to be in the range of $12.2 to $12.8 per share, forming a ratio of price to economic EPS of 14.5x. For 2016, the company expects economic EPS to be in the range of $13.2 to $14.8. The guidance assumes 2% quarterly market growth, beginning in the first quarter of 2016.


AMG is valued at 12.7x on a one-year forward price-to-earnings ratio, compared to 14.1x for its peers. Asset managers have reported lower profitability for the third quarter of 2015, resulting in falling prices and valuations. Companies with a diversified asset base could have an edge over the local players as the select global markets offer potentially better opportunities. AMG could increase its focus on international assets by selecting boutiques offering these options.


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