If you saw a share price climb by 40% one year, then crash by 50% the next, you could be forgiven for thinking it’s likely to be one of those boom-and-bust growth stocks.
But this time, it’s venerable investment firm Jupiter Fund Management (LSE: JUP) of which I speak, and the two years in question were 2017 and 2018 respectively. So far this year, the share price is up 10% at 324p, but that hides a good bit of volatility — on 1 July it had climbed as high as 435p before falling back once again.
What’s been happening? Well, Jupiter’s steady earnings growth came to an end with 2018’s 7% fall, and analysts have a further 11% drop on the cards for this year. It seems to be largely caused by a move towards passive investment funds and their lower charges (which, incidentally, I think is a very sensible move for most investors).
Update
The outward movement of cash was confirmed by Friday’s Q3 trading update, which revealed a net outflow of £1.3bn during the quarter. Total assets under management dropped by £0.8bn, but at £45.1bn at 30 September it’s still a hefty sum to be responsible for.
Even if the attractiveness of the actively-managed funds segment is falling, Jupiter is still recording decent earnings and paying big dividends. The dividend was maintained at the halfway stage, and the company reiterated its policy of returning surplus capital to shareholders through special dividends.
Total dividends are forecast at 23p per share this year, for a yield of 7.2%. With the shares on a forward P/E of 11.4, I’d say that looks like decent value.
Favourite
Hedge fund manager Man Group (LSE: EMG) has long been a favourite of mine in the asset management business, though the nature of its operations tends to make its earnings, and thus the share price, a little volatile. Over the past five years, for example, the Man Group share price is up 35% (against the FTSE 100’s 14%), but it’s gone through some steep rises and falls along the way.
Man released a third-quarter update on Friday too, and also reported a net outflow in the period, of $1.1bn this time. Funds under management are down a little, at $112.7bn, from $114.4bn at 30 June.
Cash back
While telling us that “uncertain economic conditions mean the outlook for flows remains mixed,” CEO Luke Ellis added that “given our continued strong cash generation, we are pleased to announce a further return of capital.”
Man has completed the $100m share repurchase announced in 2018, and now intends to repurchase up to another $100m in shares.
The erratic nature of the Man Group share price makes me think it’s one to buy on the dips, and I think we’re in one such dip now. EPS is predicted to increase by 50% this year (admittedly after a 40% drop in 2018), and the shares are on a P/E of under 11. With a predicted dividend yield of 4.6%, I reckon we’re looking at a decent buying opportunity now.
Man Group was already on my buying shortlist, and I’ve now underlined it.