Here are two financial flyers that deserve some brotherly love from investors. There is a good chance they will reward your filial devotion.
Up Close and personal
Merchant banker Close Brothers Group (LSE: CBG) offers its customers lending, deposit taking, wealth management services and securities trading. This FTSE 250 company employs more than 3,000 people, mainly in the UK, and offers its services to both individuals and small businesses, plus a range of related services to retail brokers, asset managers and institutional investors.
It has made plenty of money for investors lately, with its share price up 25% over the past 12 months, and 130% over five years. Last week’s Q3 results saw its banking division report a “solid” loan book, up 4.1% year-to-date at £6.7bn, with management confident of delivering a good result for the full year. Its property and security businesses also performed strongly, although retail finance and commercial finance loans disappointed.
Buoyant stock markets have driven Close Brothers, with strong net inflows into its asset management division, up 7% to £8.5bn, taking total client assets to £10.7bn. This is all very promising and operating margins of 33% also impress, although there are signs the growth story may slow. Earnings per share (EPS) are expected to dip by 1% in the year to 31 July 2017, then climb just 3% subsequently. Today’s valuation of 12.4 times earnings and yield of 3.5% looks undemanding nonetheless.
Oh Brothers!
So to another set of siblings, wealth manager Rathbone Brothers (LSE: RAT). Their specialisms include investment management services for individuals, charities and professional advisers, including financial planning, tax and trusts, multi-manager portfolios and offshore investment management. Investors in the FTSE 250 company, which has a market cap of £1.25bn, have also enjoyed a successful 12 months, the share price up 25% in that time. Over five years it has grown 110%. At these growth rates, Close Brothers and Rathbone Brothers are starting to look like identical twins.
One major difference is the valuation. While Close looks affordable judging by its price-to-earnings ratio of 12.4, Rathbone looks pricier at 20.12 times. Its dividend yield is also lower at 2.32%. However, Rathbone has been flying lately, with total funds under management rising a whopping 22.2% to £35.8bn on 31 March, up from £29.3bn a year ago.
Good to the bone
Rathbone has been boosted both by strong markets and investment performance, with chairman Mark Nicholls hailing its successful progress towards strategic goals, while dutifully warning of continuing political and economic uncertainties.
However once again, City forecasters are anticipating a slowdown, as measured by EPS, which are expected to rise just 3% this calendar year, although that leaps to 11% in 2018. Forecast revenue growth looks steady, up from £251m in 2015 to £275m this year and £295m in 2018.
Bros
Close Brothers and Rathbone Brothers display another sibling similarity. Operating in the same industry, both are subject to exactly the same macro tailwinds. They look like tempting growth plays today, with global stock markets bubbling around all-time highs. If markets dip, the brothers could be in a spot of bother. However, that might be an even better time to buy them.