Published Wed, 09 Jan 2019 19:34:21 -0500 on Seeking Alpha
Asset managers had a tough year in 2018. The onset of low-cost exchange-traded funds and do-it-yourself investing put a major dent in the asset management industry, particularly when it comes to actively-managed funds. Traditional mutual funds are falling out of favor, which means asset managers need to adapt to the changing environment.
While the industry overall struggled in 2018, Ameriprise Financial (AMP) performed very well. Ameriprise generated strong earnings growth throughout the year, but the market does not seem to care. Shares of Ameriprise have declined 35% in the past one year.
The good news is that the continued decline in the share price could be a buying opportunity. Ameriprise is a Dividend Achiever with a 3.2% yield and the stock is undervalued. For these reasons, we expect the stock to return in excess of 15% per year over the next five years.
Shrugging Off The Industry Woes
According to a recent report, asset managers were dealt a number of blows last year. The decline of the S&P 500 Index and heightened investor uncertainty put pressure on assets under management. Further eroding AUM was the elevated competitive threats. Traditional active managers are struggling to keep AUM steady, as low-cost ETFs have forced asset managers to lower fees.
While it is true that some asset managers are feeling the impact, Ameriprise has continued to hold up well. The most recent quarterly results were very strong, with 9% revenue growth and 20% adjusted... Read more