Rathbone Brothers plc is a growth stock that could have far more to give

Rathbone Brothers plc (LON: RAT) shares have gained 50% in the past year, and show no signs of stopping.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I’ve been looking at Rathbone Brothers (LSE: RAT), and the investment manager’s first-half results released Tuesday are making me sit up and pay close attention.

Rathbone shares have climbed by 52% since 2016’s low in October, to 2,667p (including a results-day 37p rise), and have doubled in price over the past five years.  The reason for that seems apparent from the company’s recent performance — we’ve seen earnings per share growing by 58% in just four years, with analysts forecasting a further 15% gain by the time we reach December 2018.

While the company spoke of “ongoing geopolitical uncertainty” which is currently dominating short-term market conditions, we did see underlying pre-tax profit rise by 22.7%, to £43.3m, in the first six months of the year.

Funds

The key long-term measure of confidence in an investment manger is its level of funds under management, and we saw a 7% rise to £36.6bn since December 2o16 — and seeing as the FTSE 100 put on only 2.4% over the same period, I’m impressed by that.

I would not place my own investment cash under the control of a professional manager, purely because I think my own simple strategy is effective enough without paying anyone else to do it for me. But there are many, from private investors to charities and pension funds, who need the services of companies like Rathbone — and I reckon buying shares in investment managers themselves can be very rewarding.

I see what might be thought of as contrarian safety here too — it’s when markets are at their most volatile that people turn more to respected professionals to manage their cash. 

And I see Rathbone Brothers as a well-managed and well-respected firm that should continue to do well.

Corporate finance

Financial services at all levels can be very profitable, and I’ve also been examining Intermediate Capital Group (LSE: ICP). The company provides capital for a variety of corporate needs, including IPO, management buyouts and similar.

The first quarter of this year has been pretty good, with inflows in the period of €0.6bn coupled with “robust demand for current fundraising“.

The firm did see a 2% drop in funds under management, to €23.3bn, in the three months, but it put that down to an “expected quieter quarter” and an adverse currency exchange impact on dollar-denominated funds among other things. But inflows in the second quarter are expected to be higher.

Outgoing chief executive Christophe Evain said: “Our expectation continues that this will be a strong fundraising year,” and that supports expectations of a good year this year.

One for the brave?

Intermediate Capital is in a volatile sector, and that can show through in erratic share price movements. But one thing I see as a long-term calming effect is the company’s progressive dividend.

It’s grown from 20p per share in 2013 to 27p this year, and though an impressive share price performance over that timescale has dropped the yield to 3.8%, we’re also looking at a trailing P/E of under 10. Dividend cover is strong, and I expect to see yields increasing nicely over time.

If you’re happy to handle short-term volatility without panicking (which I see as an essential characteristic of a growth investor), I really do see Intermediate Capital Group as having solid long-term potential.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

With a P/E ratio of 9, is the Aviva share price a bargain?

Christopher Ruane looks at the Aviva share price and considers some strengths and weaknesses of the FTSE 100 insurance business.

Read more »

Surprised Black girl holding teddy bear toy on Christmas
US Stock

Is it too late to buy growth stock Shopify after its 25% pop?

Up more than 40% this year, Shopify is on fire at the moment. Here, Edward Sheldon explains how he’d play…

Read more »

Investing Articles

Investors should consider buying this energy AIM stock, up 50% in the past year

AIM stock Afentra has seen a stellar price rise in 12 months to November. I believe there may be room…

Read more »

Investing Articles

2 ISA shares to consider for a large passive income!

Looking for dividend shares to buy in a Stocks and Shares ISA or Lifetime ISA? Royston Wild reveals two of…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

A Bitcoin investment that can be held inside a Stocks and Shares ISA or SIPP

UK investors can’t buy Bitcoin ETFs for their investment accounts or SIPPs due to FCA regulation. This stock could be…

Read more »

Entrepreneur on the phone.
Investing Articles

As the Vodafone share price slides 6% on lacklustre H1 results, what does the future hold?

After posting moderate results this morning, Vodafone saw its share price sink further, erasing this year's gains. Our writer looks…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing For Beginners

If I’d invested £5k in a FTSE tracker fund after the pandemic crash, here’s what I’d have now

Jon Smith explains the extent of his potential gains if he'd invested in a FTSE tracker fund during the Covid…

Read more »

Investing Articles

2 top shares I’ve bought for my Stocks and Shares ISA in November

This writer reveals a pair of fast-growing businesses that he's recently added to his Stocks and Shares ISA for the…

Read more »