Oh I wish it could be Christmas everyday, given what the festive season does for share prices. The FTSE 100 has flown in 26 of the last 32 Decembers, rallying averaged 2.3% over the month, according to figures from Architas. When stock markets soar, financial stocks usually climb even higher. So could these three be flying higher than Santa on Christmas Eve?
Aberdeen Asset Management
The last few years have been tough on emerging markets, and even tougher on specialist emerging markets fund manager Aberdeen Asset Management (LSE: ADN). Its share price is down 45% over the last two years due to a surge in net outflows from disgruntled investors as fund performance slips. It was staging a bit of a rally earlier this year, but now the fight seems to have gone out of it. The reason? Step forward President-elect Donald Trump, raising fears of a trade war with China, Mexico and other emerging economies. The stronger dollar could pile on the pressure, as many have borrowed heavily in the greenback, and this will ramp up their debt servicing costs.
The result? November’s full-year results show Aberdeen suffered £32.8bn of net outflows, with underlying profit before tax down 28% to £352.7m. On the plus side it retains a strong cash position of £548.8m and its juicy 7.52% yield may tempt income seekers. The danger is that a Santa rally sweeps through the US but bypasses emerging markets – and Aberdeen.
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Hargreaves Lansdown
Mass-market independent financial adviser Hargreaves Lansdown (LSE: HL) has been a darling of investors in recent years, a true growth success story. Over the last five years, annual revenues have leapt from £238m to £338m, although the rate of growth has slowed lately. In fact, they dipped from £395m to £388m in the year to 30 June 2016, hit by stock market turbulence.
Some of the shine has come off the stock with first quarter net new business inflows of £1.11bn, down 22% year-on-year. However, net quarterly revenue hit a record £90.6m after rising 15%. It now has £67.6bn under administration, up from £61.7bn in June 2016. If you believe in the Santa rally, then Hargreaves Lansdown could be a good way to play it. The downside is that it trades at 32.7 times earnings and needs to keep the growth story going to justify that kind of valuation.
Schroders
Stock market turbulence? What turbulence? Asset manager Schroders (LSE: SDR) has sailed through recent stock-market volatility, its share price more than doubling over the last five years. There have been bumps along the way but it’s hitching the reindeer for a Santa rally after rising 5% in the last week, more than double the rise on the FTSE 100.
Schroders’ latest statement covering the nine months to 30 September showed profits before tax dipping slightly to £436.2m, although assets under management jumped from £294.8bn to £375bn. Net inflows also remain healthy but there’s a price to pay for success, in this case 16.52 times earnings. Still, with growing exposure to the US economy following its acquisition of a securitised credit business in North America, it could still be in for a Merry Christmas.
