Skip to Content
Stock Analyst Update

Amid Sell-Off, Take Note of Asset Managers

Invesco piques our interest at today's prices.

Mentioned: , , , ,

With U.S. equity markets declining around 4% last week, U.S.-based asset managers have given back much of the strong gains they've seen since the start of the year. We've always noted that the best time to buy asset managers is during market sell-offs, given that the group (which traded down 7% last week) tends to go down 1.5-2.0 times the market decline, with investors generally seeing more attractive entry points for our top two long-term ideas: wide-moat-rated  BlackRock (BLK) and  T. Rowe Price (TROW). That said, these two names rarely get cheap, which is why we've also encouraged investors to look at some of the second-tier names in the group--wide-moat Eaton Vance, narrow-moat  Invesco (IVZ) and  Cohen & Steers (CNS), and no-moat  Affiliated Managers Group (AMG)--which can trade down much harder during market sell-offs, offering investors wider margins of safety than they're likely to see with BlackRock and T. Rowe Price.

Generating the highest operating margins among the U.S.-based asset managers we cover and tending to produce above-average levels of organic growth, BlackRock and T. Rowe Price have generally traded at a 10%-plus premium to the group, and are currently trading at 43% and 14% respective premiums. The two firms are also trading at less than 10% discounts to our fair value estimates, making them less approachable right now. The same could be said for Eaton Vance, trading at a 30% premium to the group and only a 5% discount to our fair value estimate. While Cohen & Steers, AMG, and Invesco are all trading at greater than 12% discounts to our fair value estimates, Invesco, at 11.6 and 10.4 times consensus earnings estimates for 2018 and 2019, respectively (compared with Cohen & Steers at 15.3 and 14.2 times and AMG at 11.1 and 10.1 times), along with a solid organic growth profile (generating a 1.8% CAGR for organic growth during 2013-17 with one of the lowest standard deviations in the group), is the more attractive option at today's prices.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Greggory Warren does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.