Affiliated Managers Collects Its Rivals

4/13/2015


  Recent Price
$216
  Dividend
$0.00
  Yield
0.0%
  P/E Ratio
19
  Shares (millions)
59
  Long-Term Debt as % of Capital
31%
  52-Week Price Range
$221.46 - $174.43

Among the S&P 500 Index's 10 sectors, 2015 profit-growth prospects shine brightest for financials, projected to grow per-share profits 16% versus 2% for the broader index. Analyst estimates have also been surprisingly resilient — financials are the only sector with 2015 profit estimates up since July, according to Thomson Reuters.

Even among financial stocks, Affiliated Managers Group ($216; AMG) stands out, projected to generate 16% higher earnings per share in 2015. Analysts expect the 18 asset managers in the S&P 1500 to average 8% growth.

Affiliated Managers shares trade at 16 times expected year-ahead earnings, a 12% discount to their peer-group average. Affiliated Managers Group, earning an Overall score of 97 and Value rank of 69, is a Long-Term Buy.

Managing the managers

Affiliated Managers has built its business by acquiring ownership stakes in boutique investment-management firms. The company managed $620 billion through its affiliates at the end of 2014, up 15% from a year earlier and 44% from the end of 2012. That growth comes from a mix of new investments, net inflows from clients, and portfolio performance.

To help manage risk, Affiliated Managers diversifies across distribution channels, asset classes, and geographies. The firm manages money for institutional clients (57% of assets under management), mutual funds (31%), and high-net worth individuals and family trusts (12%). Equities represent 63% of assets, followed by 28% in alternative assets (including private equity and hedging products), and 9% in fixed income. About 38% of assets are in the U.S. The remaining 62% is in foreign investments, including 10% in emerging markets. The percentages above reflect the location of Affiliated Managers' equity partners more than a bias for investments in a region. The company has equity partners and clients in more than 50 countries, spread across four continents.

Last year, sales rose 15%, per-share profits 23%, cash from operations 45%, and free cash flow 47% to reach all-time highs. The company does not pay a dividend and in the past has repurchased stock only infrequently. Instead, it uses excess cash to take equity stakes — typically $300 million to $400 million each — in investment firms that usually have $10 billion to $20 billion in assets under management. Last year, Affiliated Managers spent $1.3 billion to gain interests in four asset managers and increase its stake in an existing partnership. Affiliated Managers has already completed one deal this year, and a second could be in the works. Management also said it plans to ramp stock repurchases this year, which should shave about 3% from the share count.

Conclusion

Affiliated Managers' March-quarter results are expected in the last week of April. Analysts project growth of 11% in sales and 19% in per-share profits. The company has topped the consensus profit estimate in 17 straight quarters.

Investors can obtain an annual report for Affiliated Managers Group Inc. at 777 S. Flagler Drive, West Palm Beach, Florida, 33401; (800) 345-1100; www.amg.com.

AFFILIATED MANAGERS GROUP
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Dec '14
3.55
vs.
3.66
8%
216.49
-
174.43
19 - 15
Sep '14
2.76
vs.
2.19
16%
214.41
-
192.34
20 - 18
Jun '14
2.65
vs.
2.18
18%
206.19
-
176.85
20 - 17
Mar '14
2.48
vs.
2.27
18%
219.39
-
180.85
21 - 18
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Est.
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2014
2.51
11.45
0.00
219.39
-
174.43
19 - 15
2013
2.19
10.31
0.00
217.33
-
132.98
21 - 13
2012
1.81
7.71
0.00
132.33
-
94.32
17 - 12
2011
1.70
6.62
0.00
113.00
-
70.27
17 - 11
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
97
90
69
97
74
88
49

   * Earnings exclude special items.
   † Quadrix scores are percentile ranks, with 100 the best.


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