Abrdn, an investment manager, has been under-owned for years due to a proliferation of stocks and a lack of investment in research. This year, Abrdn is poised to make an illustrious return to the FTSE 100 index.
Abrdn has never fully recovered from the recession and since then it has undergone significant restructuring efforts but still remains below its pre-recession high.
Recently, Abrdn is up nearly 6% which signals that markets are looking more optimistic about its offerings.
It is worth noting that Abrdn has traditionally been priced as a premium option for those investors who prefer small cap stocks. This makes it a good opportunity for the average retail investor and therefore a great stock pick for those in need of a FTSE 100 fund.
Abrdn recently announced its 3Q12 results which exemplified the firm’s strong positives. Abrdn reported that its total assets under management (ATOM) rose by 13% year to year, but it is important to take into account the continued global economic downturn which has led to falling equity prices worldwide. Over the same period, Abrdn’s ATOM in fact shrank by 3% indicating a good performance under difficult market conditions.
While U.S. stocks have significantly outperformed global equities this year, investment-grade corporate bonds, which are the bread and butter business of Abrdn, have lagged in performance. This has led to lower operating margins at Abrdn in recent months and therefore a decline in its share price, which is reflected in its P/E ratio (its price relative to earnings). View more on Instagram
In spite of reported results for the quarter being below market expectations, Abrdn still managed to improve operating margin by 8% over the last year helped by cost control measures.
Abrdn has a significant presence in the European and Asian markets which are areas that are expected to witness significant growth due to the rise of emerging market economies. Abrdn’s Asian business generates 40% of ATOM from its Hong Kong office. The company has also done well in its restructuring efforts post the recession as it has been able to decrease its leverage ratio by nearly 30% over the last year. This is a welcome development for investors, especially given that the company is still dependent on debt financing and a prolonged period of rising interest rates would adversely affect Abrdn’s performance.