Affiliated Managers Group Inc.
) 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
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
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
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.
Ameriprise Financial, Inc.
Artisan Partners Asset Management Inc.
). While Waddell & Reed carries a Zacks Rank #1 (Strong Buy),
Ameriprise and Artisan Partners have the same Zacks Rank as
AFFIL MANAGERS (AMG): Free Stock Analysis
AMERIPRISE FINL (AMP): Free Stock Analysis
ARTISAN PTNR AM (APAM): Free Stock Analysis
WADDELL&REED -A (WDR): Free Stock Analysis
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