Ive been looking at Rathbone Brothers (LSE: RAT),andthe investment managers first-half results released Tuesday are making me sit up and pay close attention.
Rathbone shares have climbed by 52% since 2016s low in October, to 2,667p (including a results-day 37p rise), and have doubled in price over the past fiveyears. The reason for that seems apparent from the companys recent performance weve 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 rising 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 100put on only 2.4% over the same period, Im impressed by that.
Iwould not placemy 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 its 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 Ive also been examiningIntermediate 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 andan adverse currency exchange impact on dollar-denominated funds among other things. Butinflows in the second quarter are expected to be higher.
Outgoing chief executiveChristophe Evain said: Our expectation continues that this will be a strong fundraising year, and that supportsexpectations 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 companys progressive dividend.
Its grown from 20p per share in 2013 to 27p this year, and though an impressive share price performance over that timescale hasdropped the yield to 3.8%, were 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 youre happy to handle short-term volatility without panicking (which I see as an essential characteristic of a growth investor), I really do seeIntermediate Capital Group as having solid long-term potential.
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The pastfive years have brought indouble-digit annual earnings growth, and the City’s experts are predicting two more years of solid growth ahead of us. On top of that,a progressive dividend policy adds an extra attraction to the mix.
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