It happens every year. Autumn hoves into view, and everybody starts fretting about a potential stock market crash. This year the doom-mongers have returned with added intensity, but don’t take them too seriously, they’ve been wrong before.
Ashmore Group
Share price sentiment matters if you are investing in asset management companies such as emerging markets specialist Ashmore Group (LSE:ASHM), as they have direct exposure to stock market fortunes. The FTSE 250 group enjoyed a great start to 2019 as global markets started the year brightly. The Ashmore share price is still up more than 30% measured over 12 months, and despite a sharp dip in recent weeks, as the US-China trade war knocked sentiment.
The stock is up around 1.5% this morning as Ashmore posted a 24% rise in assets under management to $91.8bn, welcome news after July’s figures showed Q4 assets grew less than expected. Growth was driven by broad-based net inflows of $10.7bn while a positive investment performance contributed $6.9bn. Adjusted net revenues grew 11%, driven by a 17% increase in net management fees, while profit before tax jumped 15% year-on-year to £219.9m.
CEO Mark Coombs said the emerging markets backdrop “remains relatively healthy, with economic indicators such as GDP growth and inflation continuing to trend favourably,” despite the “confrontational” US trade policy.
Ashmore looks well-positioned to benefit, although some investors may be wary of asset managers generally right now, given current uncertainties. Today, management held the final dividend at 12.1p, as it looks to re-establish cover at 1.5 times statutory earnings, which leaves the forecast yield at a solid 3.7%.
Emerging markets have been the best performers of 2019, with China up 30% and Russia 24% year-to-date, so there is a chance it could struggle when the investment cycle favours other regions. The Ashmore share price does look a little expensive today, trading at a forecast valuation of 19.1 times earnings, although earnings are forecast to rise a healthy 25% next year.
Whether you think it’s a buy at today’s price will partly depend on where you see global stock markets moving next.
Schroders
FTSE 100 asset and wealth manager Schroders (LSE: SDR) has had a bumpier time of it, the share price down 5% over the last year and trading just 14% higher than five years ago.
In contrast to Ashmore, Schroders has been suffering net outflows, recently reporting that clients withdrew £1.2bn in the first half of the year, as the risk-off environment hit its intermediary division particularly hard. Pre-tax profits fell 14.28% to £340.4m in the six months to 30 June, although analysts expected worse, and despite the issues, record high assets under management of £444.4bn and a “strong” pipeline of new inflows bode well.
Schroders covers a far broader range of markets, both developing and emerging, but unlike Ashmore, that leaves it directly exposed to any slowdown in the US, Brexit-addled UK and Europe. However, if you think recent negativity has been overdone, you might be tempted to jump in at today’s reasonable forward valuation of exactly 14 times earnings.
The forecast dividend is a healthy 4%, with cover of 1.7, and it has a decent record of raising the payout every year.