If you pile into buy-to-let property you are deciding to place a massive bet on one class of asset – property. With so much capital tied up in the deal, you probably won’t have much left to invest in other assets, but shares on the stock market have been the best-performing asset of all over the long haul.
One of the great things about investing in shares is that you can diversify. You can buy shares in property companies that diversify across a portfolio of assets, which would stop you relying on perhaps just one buy-to-let property. However, you can also diversify away from property altogether and I’d be tempted by the 7%+ forward dividend yield available with investment management company Polar Capital Holdings (LSE: POLR).
Trading well
The firm provides investment management and advisory services to professional and institutional investors, offering funds diversified by asset class, geography, sectoral specialisation, strategy and structure, and business has been good. Today’s half-year results report revealed Assets Under Management (AUM) rose almost 23% year-on-year, to £14.7bn, driven by net inflows of £0.9bn and a £1.8bn market uplift in the performance of the firm’s funds. Adjusted diluted earnings per share shot up almost 86%, and the directors expressed their satisfaction and confidence in the outlook by pushing up the interim dividend by more than 33%.
During the period, the company launched three new funds: Emerging market Stars, China Stars and China Mercury funds, suggesting that it sees value and potential in those markets. Meanwhile, in the first half of the trading year, around £23.3m boosted the company’s coffers from performance fees. The chief executive, Gavin Rochussen said in the report the firm had enjoyed “a highly satisfactory first six months,” but sounded a mild warning about the immediate outlook. He thinks the company we will see “more volatile markets and a reduction in risk appetite” from investors because Europe and Japan will reduce “accommodative monetary policy” and the US will continue to “normalise interest rates with monetary tightening.” Many people, it seems, are expecting changing interest rates to play a big part in the financial landscape going forward.
Poised to take advantage of market volatility
However, Polar Capital is poised to strike if share prices fall, and Rochussen said the firm’s bottom-up, fundamental fund strategies across global markets are “positioned to take advantage of valuation anomalies that arise in good quality, publicly-traded companies.” Meanwhile, we can take advantage of Polar Capital’s own share price, which has slipped back recently, probably because of the uncertain outlook.
Today’s share price around 491p throws up a forecast dividend yield of 7.2% for the trading year to March 2020, which looks attractive. The forward price-to-earnings ratio runs a little over 10.5, suggesting reasonable value, and assuming we don’t suffer another 2008-style market crash soon, I think the stock is tempting.