5 Must-Buy Investment Management Stocks for Stellar Returns
Wall Street has maintained its northbound journey in 2024 after an astonishing rally in 2023. Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are up 2.9%, 5.9% and 8%, respectively. Last week, these three indexes posted the fifth straight winning week and the 14th positive week in 15.
Meanwhile, the investment management industry, which consists of companies that manage securities and funds for clients to meet specified investment goals, has seen impressive growth in the past year.
The Zacks-defined Financial – Investment Management Industry is currently in the top 13% of the Zacks Industry Rank. In the past year, the industry has provided 23.8% returns, while its year-to-date return is 6.1%. Since it is ranked in the top half of Zacks Ranked Industries, we expect the consulting services industry to outperform the market over the next 3 to 6 months.
Positive Catalysts
At present, the interest rate is in the range of 5.25-5.5%, its highest in more than 22 years. While the Fed paused rate hikes and signaled rate cuts in 2024, the current high interest rate environment is expected to continue to support margins to an extent in the near term.
In its January FOMC, the central bank categorically denied the much-hyped first rate cut in March. Though interest rate reduction will start this year, how much progress the Fed will make this year is yet to be cleared. Therefore, margin expansion should continue in 2024.
Client activists remain decent to support asset under management (AUM) growth. Specifically, client activity increased in the second half of last year after the Fed announced a pause in rate hikes.
Thus, supported by overall asset inflows, growth in AUM is expected to continue. Asset managers’ top lines are, therefore, expected to be positively impacted by higher performance fees and investment advisory fees, which constitute the majority of their revenues.
Finally, a preliminary estimate revealed that a massive $1.4 trillion entered U.S. money market funds primarily due to an extremely high interest rate regime, with cash yielding around 5%. A systematic decline in the market interest rate will shift a major part of these gigantic funds to equity markets, especially for portfolio management purposes.
Our Top Picks
We have narrowed our search to five investment management stocks that have strong growth potential for 2024. These stocks have seen positive earnings estimate revisions in the last 30 days. Each of our picks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past three months.
Image Source: Zacks Investment Research
SEI Investments Co. SEIC is a publicly owned asset management holding company. SEIC is a leading provider of wealth management business solutions in the financial services industry. SEIC offers investment processing, management and operations solutions globally. SEIC operates through the following five business segments: Private Banks, Investment Advisors, Institutional Investors, Investment Managers, and Investments in New Businesses.
SEI Investments has an expected revenue and earnings growth rate of 6.1% and 13.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the last 30 days.
AllianceBernstein Holding L.P. AB is a publicly owned investment manager. AB manages separate client-focused portfolios. AB primarily invests in common and preferred stocks, warrants and convertible securities, government and corporate fixed-income securities, commodities, currencies, real estate-related assets and inflation-protected securities.
AB employs quantitative analysis along with long-term purchases, short-term purchases, trading, short sales, margin transactions and option strategies, including writing covered options, uncovered options and spread strategies to make its investments. AB obtains external research to complement its in-house research.
AllianceBernstein Holding has an expected revenue and earnings growth rate of 8.6% and 10.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the last 30 days.
Artisan Partners Asset Management Inc.’s APAM robust AUM balance is a major tailwind. We project total AUM to reflect a CAGR of 4.6% by 2025. Diverse investment strategies across multiple asset classes and investments in new teams are likely to aid APAM’s revenue growth. We expect total revenues to witness a CAGR of 3.7% by 2025. Also, APAM’s decent liquidity position will help meet debt obligations.
Artisan Partners Asset Management has an expected revenue and earnings growth rate of 4.1% and 8.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the last 30 days.
Janus Henderson Group plc JHG is an asset management holding entity. JHG provides services to institutional, retail, and high-net-worth clients. JHG manages separate client-focused equity and fixed-income portfolios. Janus Henderson Group also manages equity, fixed-income, and balanced mutual funds for its clients. JHG invests in public equity and fixed-income markets, as well as in real estate and private equity.
Janus Henderson Group has an expected revenue and earnings growth rate of 5.9% and 2.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 11.1% over the last 30 days.
Virtus Investment Partners Inc. VRTS provides investment management products and services to individuals and institutions in the United States. VRTS operates a multi-manager asset management business, comprising a number of individual affiliated managers, each with a distinct investment style, autonomous investment process and individual brand.
Investors have an array of needs and VRTS offers a variety of investment styles and multiple disciplines to meet those needs. VRTS provides its products in a number of forms and through multiple distribution channels.
VRTS’ retail products include open-end mutual funds, closed-end funds and separately managed accounts. VRTS manages institutional accounts for corporations, multi-employer retirement funds and foundations, endowments, special purpose funds and other types of institutions.
Virtus Investment Partners has an expected revenue and earnings growth rate of 8.8% and 19.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.2% over the last seven days.
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AllianceBernstein Holding L.P. (AB) : Free Stock Analysis Report
Virtus Investment Partners, Inc. (VRTS) : Free Stock Analysis Report
SEI Investments Company (SEIC) : Free Stock Analysis Report
Artisan Partners Asset Management Inc. (APAM) : Free Stock Analysis Report
Janus Henderson Group plc (JHG) : Free Stock Analysis Report
