As investment options continue to diversify, there is a growing trend of individuals seeking professional management for their investments. Factors such as the rise of alternative investment strategies, increasing consideration of Environmental, Social, and Governance (ESG) criteria, and the adoption of cost-effective digital-focused strategy are expected to sustain the momentum in the industry.
That said, this article explores the fundamentals of three asset management companies, Ashford Inc. (AINC), SEI Investments Company (SEIC), and Westwood Holdings Group, Inc. (WHG), which might be worth adding to your portfolio amid the industry tailwinds.
According to Statista, the global Assets Under Management (AUM) in the wealth management market is projected to hit a whopping $130.60 trillion in 2024. The growth is expected to continue steadily, with a modest CAGR of 5.9% from 2024 to 2027, ultimately reaching a remarkable $155.10 trillion by 2027, underscoring the increasing demand for professional asset management services.
Furthermore, the asset management landscape is undergoing a significant transformation. The widespread integration of Artificial Intelligence (AI) and generative AI has become pivotal, influencing various aspects of asset management, including opportunity identification, due diligence, investment decision-making, and portfolio management.
In 2023, the global AI in asset management market held a value of $2.60 billion and is anticipated to achieve $11.90 billion by 2030, experiencing a robust CAGR of 24.4% within the forecast period from 2023 to 2030.
While AI is poised to increase operational efficiency within the industry, ESG investing strategies are expected to elevate ethical considerations. ESG considerations can aid in recognizing enduring risks linked to climate change and social issue, proving to not only be morally sound but also a financially lucrative investment option.
Overall, the asset management industry is navigating a transformative period driven by technological advancements, evolving investment trends, and the integration of ESG considerations.
With that being said, let’s dive deeper into the fundamentals of the featured Asset Management stocks, beginning with the third choice:
Stock #3: Ashford Inc. (AINC)
AINC is an asset management firm providing investment management and related services to the real estate and hospitality sectors.
The stock’s trailing-12-month CAPEX/Sales of 7.62% is 281.9% higher than the 2% industry average. Its trailing-12-month asset turnover ratio of 0.63x is 204.4% higher than the industry average of 0.21x. Furthermore, AINC’s trailing-12-month cash per share of $8.72 is 30.9% higher than the $6.55 industry average.
For the fiscal third quarter, which ended on September 30, 2023, AINC’s total revenues increased 10.1% from the year-ago value to $181.22 million.
During the same quarter, the company’s adjusted EBITDA amounted to $11.77 million. Additionally, its total assets stood at $483.10 million, increasing marginally compared to $482.36 million as of December 31, 2022.
Street expects AINC’s revenue and EPS for the fiscal fourth quarter (ended December 2023) to increase 5.3% and 13.9% year-over-year to $187.90 million and $1.88, respectively. Moreover, the company has an impressive revenue surprise history, surpassing the revenue estimates in three of the trailing four quarters.
In addition, AINC’s revenue has grown at a CAGR of 25.2% and 13% over the past three and five years, respectively. Meanwhile, its EBITDA has improved at a CAGR of 18.6% over the past three years.
The stock lost marginally intraday to close the last trading session at $3.72.
AINC’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Growth and Sentiment and a B grade for Value. In the Asset Management industry, it is ranked #7. Click here to see AINC’s ratings for Momentum, Stability, and Quality.
Stock #2: SEI Investments Company (SEIC)
SEIC is a publicly owned asset management holding company. The firm provides wealth management, retirement investment solutions, asset management, asset administration, investment processing outsourcing solutions, financial services, and investment advisory services to its clients.
On January 9, 2024, SEIC paid its shareholders a semi-annual dividend of $0.46 per share. The company’s annual dividend of $0.92 translates to a 1.45% yield on the prevailing prices, while its four-year average dividend yield is 1.33%.
Its dividend payouts have grown at CAGRs of 7.3% and 7.2% over the past three and five years, respectively. Also, SEIC has a record of 13 years of consecutive dividend growth.
On December 21, 2023, SEIC acquired Altigo, a cloud-based platform for alternative investments, aiming to meet the rising demand among investors aged 25 to 44 for alternative assets. With global alternative assets projected to reach a staggering $23 trillion by 2027, SEIC anticipates that Altigo's capabilities will enhance its position in the alternatives market.
SEIC’s trailing-12-month gross profit margin of 77.84% is 28.9% higher than the 60.37% industry average. Its trailing-12-month Return On Common Equity (ROCE) of 22.61% is 93.3% higher than the industry average of 11.69%. Furthermore, the stock’s trailing-12-month asset turnover ratio of 0.81x is 288.3% higher than the 0.21x industry average.
In the fiscal third quarter, which ended on September 30, 2023, SEIC’s total revenues increased 1.2% year-over-year to $476.76 million, while its income from operations rose 112.5% from the year-ago value to $108.47 million.
Moreover, the company’s net income and EPS amounted to $115.66 million and $0.87, up 87.6% and 93.3% from the prior-year quarter, respectively. During the same quarter, its total current assets stood at $1.52 billion, increasing 4.5% compared to $1.45 billion as of December 31, 2022.
The consensus EPS estimate of $0.92 for the fiscal fourth quarter (ended December 2023) represents an 11% year-over-year improvement. While the consensus revenue estimate of $482.29 million for the same period reflects a 5.6% year-over-year rise.
Moreover, the company topped its EPS and revenue estimates in three of the trailing four quarters, which is excellent.
Additionally, SEIC’s revenue grew at CAGRs of 4.4% and 3.1% over the past three and five years, respectively. While its EPS and total assets have increased at CAGRs of 4.2% and 4.8% over the past three years, respectively.
SEIC’s shares have surged 8.4% over the past three months to close the last trading session at $62.48
SEIC’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has a B grade for Momentum, Stability, and Quality. Within the same industry, it is ranked #5. Click here to see the other ratings of SEIC for Growth, Value, and Sentiment.
Stock #1: Westwood Holdings Group, Inc. (WHG)
WHG manages investment assets and provides services for its clients. The company operates in two segments: Advisory and Trust.
On January 3, 2024, WHG paid its shareholders a quarterly dividend of $0.15 per share. The company’s annual dividend of $0.60 translates to a 5.08% yield on the prevailing prices, while its four-year average dividend yield is 9.72%. Its dividend payouts have grown at a CAGR of 11.7% over the past three years.
On October 31, 2023, WHG introduced a Managed Investment Solutions team based in Chicago, led by Greg Behar, Drew Miyawaki, and Shaun Murphy, bringing an average of 25 years of institutional investment experience within the firm.
This strategic inclusion of the cutting-edge Managed Investment Solutions team at WHG is geared towards enhancing the firm's capability to offer customized solutions to institutional and wealth investors. With a unique approach focused on active design complemented by passive implementation, the team aims to provide distinctive value and innovation to WHG offerings.
The stock’s trailing-12-month Return On Total Assets (ROTA) of 2.53% is 118.6% higher than the 1.16% industry average. Additionally, WHG’s trailing-12-month asset turnover ratio of 0.62x is 197.5% higher than the 0.21x industry average.
For the fiscal third quarter, which ended on September 30, 2023, WHG’s total revenues increased 42% year-over-year to $21.88 million, while its net income and EPS came in at $4.38 million and $0.41 versus a net loss and loss per share of $1.18 million and $0.15 in the prior-year quarter, respectively.
Furthermore, as of September 30, 2023, the company’s total current assets stood at $66.22 million, up 13.8% compared to $58.19 million as of December 31, 2022
Moreover, WHG’s revenue and total assets have improved at CAGRs of 9.3% and 1.5% over the past three years, respectively. Also, its levered FCF grew at a 35.3% CAGR within the same time frame.
Over the past three months, WHG’s shares have soared 20.9% to close the last trading session at $11.76.
It’s no surprise that WHG has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has a B grade for Growth, Momentum, Sentiment, and Quality. In the same industry, it is ranked #2.
In addition to the POWR Ratings we’ve stated above, we also have WHG’s ratings for Value and Stability. Get all WHG ratings here.
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SEIC shares were trading at $62.81 per share on Wednesday afternoon, up $0.33 (+0.53%). Year-to-date, SEIC has declined -1.16%, versus a 0.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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