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Analyst Blog

On Oct 7, 2013, we initiated our coverage on investment management firm, Affiliated Managers Group Inc. (AMG - Analyst Report) at Neutral, based on its strong organic growth and continued inflows. However, persistently rising operating expenses and significant intangible assets in the balance sheet remain causes of concern.

Why the Neutral Stance?

Affiliated Managers has significant organic growth prospects. The company’s portfolio of investment products provides it an edge over competitors, when it comes to fulfilling the diverse needs of clients. Moreover, with its strong balance sheet and liquidity position, the company is capable of investing in other companies.

Further, the Zacks Consensus Estimate for 2013 rose nearly 1% to $9.46 per share over the last 90 days. For 2014, the Zacks Consensus Estimate moved north by roughly 2% to $11.05 per share over the same time frame. Hence, Affiliated Managers currently carries a Zacks Rank #3 (Hold).  

Nevertheless, increase in operating expenses remains a major concern for Affiliated Managers. Moreover, intangible assets that form a substantial portion of the company’s balance sheet are subject to annual impairment reviews. This could pose a challenge, going forward.

Although Affiliated Managers’ overseas presence is a positive, risks stemming from stringent regulations, political changes or instability abroad, foreign exchange fluctuations and weak performance of regional economies can negatively affect the company's top line.

Other Stocks to Consider

Other investment management stocks that are currently performing well and are worth considering include GAMCO Investors, Inc. (GBL - Snapshot Report), Waddell & Reed Financial, Inc. (WDR - Analyst Report) and Noah Holdings Limited (NOAH - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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