On Dec 24, 2015, we issued an updated research report on Affiliated Managers Group Inc. AMG. Appreciable top-line growth remains the key strength while rising expenses continue to be a concern.
Affiliated Managers with its diversified investment products and a goal to fulfill the varied needs of clients seems to capitalize on available opportunities and pave the way for growth. The global asset management firm’s consistent efforts towards revenue generation were reflected in the 1.3% rise in revenues in the first nine months of 2015.
Moreover, the company with its strong balance sheet and liquidity position has considerable capabilities to invest in other companies. In November 2015, the company invested in three new affiliates – Systematica, Abax and Ivory, which are expected to further diversify and increase its earnings power.
Also, Affiliated Managers completed its investment in myCIO Wealth Partners, LLC, through AMG Wealth Partners, LP. The collaboration will help Affiliated Managers capitalize on the growing demand for customized high-end wealth advisory services. With myCIO in its portfolio, Affiliated Managers’ existing affiliated-advisers business will receive a huge boost, which in turn will result in more active registered investment adviser practices.
On the flip side, the constantly mounting expenses remain a challenge for Affiliated Managers. Though expenses declined marginally on a year-over-year basis in the first nine months of 2015, we expect expenses to rise going forward as the company continues to invest in affiliates. Also, the company’s inclination towards acquisitions is bound to further elevate costs, keeping the top line under pressure.
Moreover, despite healthy liquidity level and steady assets under management, Affiliated Managers has been unsuccessful in gaining investors’ confidence. The uncertainty in the market regarding the company’s future performance due to its high debt level and vulnerability to unfavorable industry conditions is evident from the 23.2% year-to-date decline in the share price.
This can also be observed in the Zacks Consensus Estimate, which declined by a penny to $12.57 per share for 2015 and marginally to $13.99 for 2016 over the last 30 days.
Currently, Affiliated Managers carries a Zacks Rank #3 (Hold).
Some better-ranked investment management firms include Federated Investors, Inc. FII, Janus Capital Group, Inc. JNS and Woori Bank Co., Ltd. WF. All these stocks hold a Zacks Rank #2 (Buy).
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