Logic says that, as the stock market continues to set record highs, asset management stocks should be going along for the ride. However, this isn't happening. While the group has returned a respectable 11.37% so far this year, it trails the S&P 500's 2019 gain by about half. So, what gives?
As well as facing shifting investor preferences for low-cost passive investing and disruptive technologies squirreling money into robo-advisor managed funds, asset managers have experienced significant asset outflows amid concerns of a looming global economic slowdown caused the ongoing U.S.-China trade dispute.
Taking a more optimistic outlook, Washington and Beijing have made inroads into a phase one trade deal, in which officials may ink an agreement before the end of the year. A further breakthrough in the ongoing sparring between the world's two largest economies would help alleviate investor concerns and possibly lead to an influx of assets under management (AUM) in the first quarter of 2020 and beyond.
Asset managers may also receive increased inflows on findings that actively managed funds accounted for nine of the top ten performing funds through June 30, according to a report cited by Forbes. Furthermore, Morningstar data revealed that 49% of large-cap active managers beat the S&P 500 through June – a statistic that bodes well for the industry that generates the lion's share of its revenues from performance and advisory fees.
Below, we look at three asset management stocks that have struggled to gain traction throughout 2019 but appear well posited to grow AUM and move higher from a technical perspective.
Franklin Resources, Inc. (BEN)
Franklin Resources, Inc. (BEN) provides asset management services to individual and institutional investors. The firm invests in equity, fixed income, and alternative markets under its Franklin, Templeton, Mutual Series, Bissett, Fiduciary, and Darby branded funds. The firm's AUM totaled $692.6 billion at the end of September, slipping from $717.1 billion at the same time last year. A strong global brand and diversified product mix positions the company to grow that figure in the coming quarters. As of Nov. 26, 2019, Franklin Resources stock has a market capitalization of $13.94 billion and offers a healthy 3.81% dividend yield but is trading down 34.16% on the year.
Since tumbling nearly 30% between July and August, Franklin shares have oscillated within a textbook symmetrical triangle. Price rallied strongly from the pattern's lower trendline support in Monday's trading session – a move that may induce further buying and trigger a possible breakout, given that 9.09% of the stock's float is held short. Those who enter here should anticipate a test of $31, where price encounters significant overhead resistance from a horizontal line and the 200-day simple moving average (SMA). Consider placing a stop-loss order just beneath the triangle pattern to protect trading capital.
Invesco Ltd. (IVZ)
Invesco Ltd. (IVZ) offers investment management services to retail and institutional clients. At the end of September, the Atlanta-based asset manager controlled $1.18 trillion in AUM across its equity, balanced, fixed-income, alternative investment, and money market operations – representing an impressive 20.7% year-over-year (YOY) increase compared to the end of September 2018. Moreover, the company's $5.7 billion acquisition of OppenheimerFunds in May this year positions it for ongoing AUM growth in 2020. Trading at $17.75 with a market value of $8.06 billion, the stock has returned 13.38% year to date (YTD) as of Nov. 26, 2019. Investors also receive an eye-watering dividend yield of 7.16%.
Invesco shares have carved out a double bottom throughout the fall, with the price breaking above the pattern's neckline earlier this month. Over the past two weeks, the stock has retraced toward the initial breakout level at $17, which now acts as key support. Price caught a bid in this area Monday that could fuel a move up to $19, where the stock finds resistance from a key downtrend line connecting two previous swing highs. Traders who go long should think about placing a stop underneath yesterday's low at $17.23 and amending it to the breakeven point if price closes above the 200-day SMA.
Affiliated Managers Group, Inc. (AMG)
With a market cap of $4.27 billion, Affiliated Managers Group, Inc. (AMG) provides investment strategies to investors through its network of affiliates. The firm usually buys an interest in small to midsize boutique asset managers and receives a fixed percentage of revenue in return. Although its affiliates operate independently, Affiliated Managers offer strategic, operational, and technological support. The firm's affiliate network had $750.7 billion in AUM as of Sept. 30, down 9.5% YOY. Despite the contraction in managed assets, the firm's global distribution reach places it in a solid position to grow this metric in the year ahead. Affiliated Managers stock yields 1.52% and has dropped 12.06% YTD as of Nov. 26, 2019.
Affiliated Managers shares appear to be forming a double bottom, although the pattern hasn't yet confirmed as price remains below the formation's neckline. However, the stock tested this closely watched resistance area on above-average volume yesterday, indicating an imminent breakout. Those who buy at current levels should set a take-profit order near $102.50, where price may run into a wall of resistance from a 12-month horizontal trendline. Cut losses if the stock reverses beneath the Nov. 20 low at $83.23, as this invalidates the trade setup.