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Investment Management Stocks in Focus: 2 to Buy, 2 to Sell
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The operating environment has not been favorable since the beginning of 2016, but the finance sector has proved its mettle and stayed afloat. Though investment management (part of the broader Finance sector) has been performing decently over the last couple of years, the trend doesn’t look very promising of late.
With industry flows and investment performance remaining weak, the near-term outlook remains uncertain due to year-end seasonality and implementation of the Department of Labor (DOL) new rule effective Apr 2017. Precisely, uncertainty over fee disclosure rules, decreasing fees, impact of change in rule on corporate class structure and mixed net flow trends remain concerns for the industry.
Due to non uniformity in adoption of rules by advisors and broker dealers, cost of servicing the various distributors for the industry is anticipated to escalate.
Further, though institutional investors continue to park funds with investment managers, retail investors have been shying away. Despite an all-out attempt, including introduction of new products to cater to the ever changing customer needs and lowering transaction fees to lure them, the industry as a whole has been witnessing net outflows.
Another factor leading to outflows is that Americans have started spending more (and saving less) as the economy is showing signs of recovery. So, the investment management industry is getting lesser funds from retail investors.
Further, investment managers are likely to be affected by the strengthening U.S. dollar on assets mix, considering their global footprints. Heightened regulatory restrictions have created a challenging backdrop for traditional asset managers. In addition, volatile equity markets have raised concerns regarding future prospects of the industry as a whole.
On the brighter side, fixed income generated positive returns as investors ran for safe-haven assets due to the prevailing global growth concerns and the uncertainty caused by the Fed rate hike.
However, the strength witnessed in the finance sector since the presidential election will perhaps support the investment managers as well. In fact, investment managers have contributed to the post-election rally of the broader finance sector.
Here is how to play the industry:
Stocks Worth Buying Now
While the concerns should not be overlooked, one can consider buying stocks that hold a favorable Zacks Rank.
Here are a couple of top-ranked stocks from the industry:
Virtus Investment Partners, Inc. (VRTS - Free Report) : This Zacks Rank #1 (Strong Buy) stock gained about 43.6% over the last six months, compared with about 5.1% gain for the Zacks categorized Investment Management industry. The stock’s earnings estimates for the current year have been revised 9.3% upward over the last 60 days.
Woori Bank Co., Ltd. (WF - Free Report) : This Zacks Rank #1 stock has gained nearly 43.1% since the beginning of the year. Earnings estimates for the current year have been revised 52.3% upward in the last 60 days.
Stocks to Avoid
Eaton Vance Corp. (EV - Free Report) : This Zacks Rank #4 (Sell) stock has gained about 28.8% since the beginning of the year, compared with nearly 4.5% gain for the Zacks categorized Investment Management industry. However, the stock’s earnings estimates for the current fiscal year have been revised 2.8% downward in the last 30 days.
Eagle Point Credit Company Inc. (ECC - Free Report) : A 5.5% downward revision in earnings estimates for the current fiscal year, over the last 30 days, precipitated a Zacks Rank #4 for this stock. The price of this stock has gained over 9% since the beginning of the year.
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Investment Management Stocks in Focus: 2 to Buy, 2 to Sell
The operating environment has not been favorable since the beginning of 2016, but the finance sector has proved its mettle and stayed afloat. Though investment management (part of the broader Finance sector) has been performing decently over the last couple of years, the trend doesn’t look very promising of late.
With industry flows and investment performance remaining weak, the near-term outlook remains uncertain due to year-end seasonality and implementation of the Department of Labor (DOL) new rule effective Apr 2017. Precisely, uncertainty over fee disclosure rules, decreasing fees, impact of change in rule on corporate class structure and mixed net flow trends remain concerns for the industry.
Due to non uniformity in adoption of rules by advisors and broker dealers, cost of servicing the various distributors for the industry is anticipated to escalate.
Further, though institutional investors continue to park funds with investment managers, retail investors have been shying away. Despite an all-out attempt, including introduction of new products to cater to the ever changing customer needs and lowering transaction fees to lure them, the industry as a whole has been witnessing net outflows.
Another factor leading to outflows is that Americans have started spending more (and saving less) as the economy is showing signs of recovery. So, the investment management industry is getting lesser funds from retail investors.
Further, investment managers are likely to be affected by the strengthening U.S. dollar on assets mix, considering their global footprints. Heightened regulatory restrictions have created a challenging backdrop for traditional asset managers. In addition, volatile equity markets have raised concerns regarding future prospects of the industry as a whole.
On the brighter side, fixed income generated positive returns as investors ran for safe-haven assets due to the prevailing global growth concerns and the uncertainty caused by the Fed rate hike.
However, the strength witnessed in the finance sector since the presidential election will perhaps support the investment managers as well. In fact, investment managers have contributed to the post-election rally of the broader finance sector.
Here is how to play the industry:
Stocks Worth Buying Now
While the concerns should not be overlooked, one can consider buying stocks that hold a favorable Zacks Rank.
Here are a couple of top-ranked stocks from the industry:
Virtus Investment Partners, Inc. (VRTS - Free Report) : This Zacks Rank #1 (Strong Buy) stock gained about 43.6% over the last six months, compared with about 5.1% gain for the Zacks categorized Investment Management industry. The stock’s earnings estimates for the current year have been revised 9.3% upward over the last 60 days.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Woori Bank Co., Ltd. (WF - Free Report) : This Zacks Rank #1 stock has gained nearly 43.1% since the beginning of the year. Earnings estimates for the current year have been revised 52.3% upward in the last 60 days.
Stocks to Avoid
Eaton Vance Corp. (EV - Free Report) : This Zacks Rank #4 (Sell) stock has gained about 28.8% since the beginning of the year, compared with nearly 4.5% gain for the Zacks categorized Investment Management industry. However, the stock’s earnings estimates for the current fiscal year have been revised 2.8% downward in the last 30 days.
Eagle Point Credit Company Inc. (ECC - Free Report) : A 5.5% downward revision in earnings estimates for the current fiscal year, over the last 30 days, precipitated a Zacks Rank #4 for this stock. The price of this stock has gained over 9% since the beginning of the year.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>