How a Santa rally could lift these 3 financial stocks.
Oh I wish it could be Christmas everyday, given whatthe festive season does forshare prices. The FTSE 100 has flown in 26 of the last 32 Decembers, rallying averaged 2.3% over the month, according tofigures from Architas. When stock markets soar, financial stocks usually climbeven higher.So could these three be flying higher thanSanta on Christmas Eve?
Aberdeen Asset Management
The last fewyears have been tough onemerging markets, and even tougher on specialist emerging markets fund manager Aberdeen Asset Management (LSE: ADN). Itsshare price is down 45% over the last two years due to a surge in net outflows fromdisgruntled investors as fund performance slips. It was staging a bit of a rally earlier this year, but now the fightseems to have gone out ofit. The reason? Step forward President-elect Donald Trump, raising fearsof a trade war withChina, 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? Novembers full-year results show Aberdeen suffered 32.8bn of net outflows, with underlying profit before tax down28% to 352.7m. On the plus side it retainsa strong cash position of 548.8m and its juicy 7.52% yield may temptincome seekers. The danger is that a Santa rally sweeps through the US butbypasses emerging markets and Aberdeen.
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 from238mto 338m, although the rate of growth has slowed lately. In fact, they dippedfrom 395m to 388m in the year to 30 June 2016, hit bystock market turbulence.
Some of the shine has come off the stockwith first quarternet 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 Santarally, thenHargreaves Lansdown could be a good way to play it. The downside is thatit tradesat 32.7 times earnings and needs to keep the growth story goingto justify that kind of valuation.
Schroders
Stock market turbulence? What turbulence? Asset manager Schroders (LSE: SDR) has sailedthrough recent stock-market volatility, its share price more than doubling over the last five years. There have been bumps along the way but its hitching the reindeerfor aSanta rally after rising 5% in the last week,more than double the rise on the FTSE 100.
Schroderslatest statement covering the nine months to 30 September showed profitsbefore tax dipping slightly to 436.2m, although assets under management jumped from 294.8bn to 375bn. Net inflowsalso remain healthy but theres 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.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Aberdeen Asset Management and Hargreaves Lansdown. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.