The biggest loser in the FTSE 250 index so far today (17 October) is Jupiter Fund Management (LSE:JUP). The stock is down 11%, hitting fresh 52-week lows at 76.15p along the way.
This ties in with a just-released Q3 trading update from the firm. Could this simply be some panic-selling, or is this something to stay away from?
Details of the report
One of the key metrics the businesses uses to judge success is the assets under management (AUM). If investors decide to park money with the firm, this is flagged as an inflow. This is good because it shows confidence in the fund managers. It also allows Jupiter to make more money, because it charges fees based on the amount of assets it manages.
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For Q3, AUM dropped by £1bn to £50.8bn. A good amount of this outflow was by retail clients, spooked by the sharp moves in the bond markets.
The report spoke of how “macro-economic uncertainty” was continuing to weigh on investors minds.
It did reaffirm expectations for the full-year of only having “modest outflows”, but this is a rather vague statement.
A large move lower
I believe part of the reason for the sharp drop in the share price is due to the difference in tone from the half-year report. If we rewind back to the end of July, the report was upbeat.
Underlying profit before tax was £46.4m, up from the £29.7m from H1 2022. It declared an ordinary dividend of 3.5p and a special dividend of 2.9p.
Of course, over the past couple of months the uncertainty with interest rates and inflation has remained. This has weighed on investors and so I think some were anticipating a slightly disappointing trading update. But it’s clear from the size of the fall that this was worse than investors were expecting.
Assessing the current value
The fall has got me focused on two points. The first is the dividend yield. Given that there was no change in the Q3 statement on dividend payments, the lower share price has acted to push up the dividend yield.
The yield is now 10.84%, making it one of the highest in the FTSE 250. Granted, there’s a risk that the dividend could be paused if the business continues to lose assets. But for the moment I don’t think this is a realistic possibility.
The other angle is the fall in the price-to-earnings (P/E) ratio. Jupiter now has a P/E ratio of 7.73, below the figure of 10 that I use as a fair value number. This could indicate that the stock is becoming undervalued and oversold.
On balance, I do think the reaction in the stock today isn’t justified. The update wasn’t great, but I don’t think the business is in a seriously bad place going forward.
On that basis I think investors should considering adding the stock to a portfolio.
