Avoid Invesco (IVZ), Buy These 3 Investment Managers Instead

Invesco Ltd. (NYSE:IVZ) has been facing setbacks of late with its shares gaining only 4.5% over the past six months, underperforming the industry’s rally of 13.9%. So what’s the reason for investors' apathy toward this stock?

Elevated expense levels remain a major concern for Invesco. After recording a fall in 2015 and 2016, operating expenses increased in 2017. While the company’s initiative — Business Optimization — will boost efficiency, expenses are expected to continue increasing due to its inorganic growth efforts and investment in franchise.

Additionally, Invesco’s high debt burden remains a headwind. As of Dec 31, 2017, the company’s long-term debt amounted to $2.1 billion (nearly 7% of total assets). It has a debt-to-equity ratio of 0.77 compared with the industry average of 0.12. The high debt obligation might drag it to a relatively disadvantageous position.

Further, Invesco has lately been witnessing downward revisions. The Zacks Consensus Estimate for earnings of $3.08 for 2018 declined marginally over the last 30 days. For 2019, it remained stable at $3.37 over the same time frame.

The stock carries a Zacks Rank #3 (Hold) with an unimpressive VGM Score of C. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best upside potential. Hence, the stock does not look promising at present.

Picking Favorable Investment Management Stocks

While Invesco doesn’t appear to be an attractive pick right now, there are a few asset managers that have a better Zacks Rank and VGM Score. Also, these companies have surpassed the industry’s rally over the past six months.

With the help of the Zacks Stock Screener, we have zeroed in on three investment management stocks with a VGM of A or B and a Zacks Rank #1 or 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Federated Investors, Inc. (NYSE:FII) carries a Zacks Rank #2 and has a VGM Score of B. Further, the company’s 2018 earnings are projected to grow at the rate of 27.5% from the prior year. Over the past six months, the company’s shares have gained 27.6%.

Hamilton Lane Inc. (NASDAQ:HLNE) has a Zacks Rank #2 and VGM Score of B. Its earnings for fiscal 2019 are expected to increase 27.1% year over year. Also, shares of the company have surged 58% over the past six months.

Sporting a Zacks Rank #1 and VGM Score of A, AllianceBernstein Holding L.P.’s (NYSE:AB) current-year earnings are projected to rise 9.6% from the last year. Further over the past six months, stock has rallied 15.6%.

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