Interesting pitch. The valuation seems interesting but two concerns:
1. This sounds dogmatic but Chris Hohn said on an interview that he has a shortlist of industries he avoids (mostly cyclical) which include asset managers. This seems like a cyclical business where underperformance begets more underperformance as funds are withdrawn AND there are headwinds from passive indexing that could destroy demand for the company's services. It's not a cyclical business like homebuilding where demand will continue existing and will recover when interest rates fall.
2. A high dividend yield is a sign that the business doesn't see opportunities to re-invest.
1. I agree. I've looked at Aberdeen, Jupiter, Magellan and other traditional investment managers. It's a terrible industry. Almost everyone is bleeding AUM to passive index ETFs.
The potential thesis for GQG is that the consensus may be wrong to extrapolate AUM decline. There is a chance that GQG can return to net inflows when the AI and semiconductor rally ends.
With GQG trading at only 7x NTM PE and 15% dividend yield, the risk/reward ratio of this bet is interesting.
2. I don't see the high dividend payout as a concern. An investment manager does not require much capital investment.
Interesting pitch. The valuation seems interesting but two concerns:
1. This sounds dogmatic but Chris Hohn said on an interview that he has a shortlist of industries he avoids (mostly cyclical) which include asset managers. This seems like a cyclical business where underperformance begets more underperformance as funds are withdrawn AND there are headwinds from passive indexing that could destroy demand for the company's services. It's not a cyclical business like homebuilding where demand will continue existing and will recover when interest rates fall.
2. A high dividend yield is a sign that the business doesn't see opportunities to re-invest.
Zishi Wu, thanks for sharing.
1. I agree. I've looked at Aberdeen, Jupiter, Magellan and other traditional investment managers. It's a terrible industry. Almost everyone is bleeding AUM to passive index ETFs.
The potential thesis for GQG is that the consensus may be wrong to extrapolate AUM decline. There is a chance that GQG can return to net inflows when the AI and semiconductor rally ends.
With GQG trading at only 7x NTM PE and 15% dividend yield, the risk/reward ratio of this bet is interesting.
2. I don't see the high dividend payout as a concern. An investment manager does not require much capital investment.