Should You Invest in Affiliated Managers Now? - Analyst Blog


Affiliated Managers Group Inc. 's ( AMG ) steady increase in assets under management (AUM) and its significant organic growth prospects position the company favorably amongst its peers. The stock gained 60.8% in 2013 and closed at $213.38 on Jan 3. Going forward, given its strong balance sheet position, the company will likely continue to invest in affiliates, which increases chances of further appreciation in its share price. Therefore, continuing to hold Affiliated Managers' shares in your portfolio will not be a bad option.

However, with high debt level, intangible assets and mounting expenses continuing to mar the company's profitability, we discourage further addition of its shares to your portfolio.

Justifying the Stance

Affiliated Managers' third-quarter 2013 economic net income of $2.19 per share beat the Zacks Consensus Estimate by a nickel. Moreover, this compared favorably with $1.91 earned in the year-ago quarter.

The company's revenues depict a consistent uptrend over the past 5 years (2008-2012). Also, for the first nine months of 2013, revenues grew nearly 21.3% from the prior-year period. The company's portfolio of investment products seems attractive and fulfills diverse client needs, which helped in driving revenues.

Further, despite an industry-wide outflow trend over the last several years, Affiliated Managers' affiliates continued to post net inflows. Going forward, this trend is expected to continue, given the strong performance of its affiliates, expansion of global distribution networks and stabilizing economic conditions.

Nevertheless, rising operating expenses remains a concern for Affiliated Managers. As the company continues to invest in affiliates, we expect a further rise in expenses, going forward. Moreover, the company's high debt level could restrict it from procuring additional finance for working capital, capital expenditures, acquisitions, debt service requirements or other purposes.

Affiliated Managers' diversified global footprint across the globe gives it a competitive edge. However, risks stemming from stringent regulations, political changes or instability in the overseas countries, foreign exchange fluctuations and weak performance of regional economies can negatively affect the company's top line.

Despite the above challenges, the Zacks Consensus Estimate was revised upward over the past 60 days. For 2013, the estimate increased 1.5% to $9.66 while for 2014, it rose 1.4% to $11.31. The estimate revision helped Affiliated Managers achieve a Zacks Rank #2 (Buy).

Other Stocks to Consider

Other investment managers worth considering include Waddell & Reed Financial, Inc. ( WDR ), Ameriprise Financial, Inc. ( AMP ) and Artisan Partners Asset Management Inc. ( APAM ). While Waddell & Reed carries a Zacks Rank #1 (Strong Buy), Ameriprise and Artisan Partners have the same Zacks Rank as Affiliated Managers.

AFFIL MANAGERS (AMG): Free Stock Analysis Report

AMERIPRISE FINL (AMP): Free Stock Analysis Report

ARTISAN PTNR AM (APAM): Free Stock Analysis Report

WADDELL&REED -A (WDR): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AMG , AMP , APAM , WDR

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