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Forget Invesco (IVZ), Buy These 3 Asset Managers for Growth


Invesco Ltd. IVZ has been facing setbacks of late with its shares plunging 25.1% over the past year, significantly wider than the industry’s fall of 2.7%. 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 and in the first half of 2018. While the company’s initiative — Business Optimization (realized annualized run-rate expense savings of $52 million by the end of second-quarter 2018) — will boost efficiency, expenses are expected to continue increasing due to its inorganic growth efforts and investment in franchise.

Also, Invesco’s high debt burden remains a headwind. As of Jun 30, 2018, the company’s long-term debt amounted to nearly $3 billion (nearly 9% of total assets). It has a debt-to-equity ratio of 0.87 compared with the industry average of 0.22. The high debt obligation might place it in a relatively disadvantageous position.

Further, Invesco’s trailing 12-month return on equity (ROE) undercuts its growth potential. Though the company’s ROE of 12.70% has gradually improved over last few years, it compares unfavorably with ROE of 17.44% for the S&P 500, reflecting that it is less efficient in using shareholders’ funds.

This Zacks Rank #4 (Sell) stock has lately been witnessing downward revisions. The Zacks Consensus Estimate for earnings of $2.71 for 2018 has declined 1.8% over the past 60 days. For 2019, it fell 2.7% in the same time frame to $2.88.

Additionally, Invesco has a Growth Score of C. Our research shows that stocks with a Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best upside potential. Therefore, the stock does not look promising at present.

Selecting Winning Asset 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 with favorable Growth Score.

With the help of the Zacks Stock Screener, we have zeroed in on three investment management stocks with a Growth Score 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.

SEI Investments Co. SEIC carries a Zacks Rank #2 and has a Growth Score of A. Further, the company’s 2018 earnings estimates have increased nearly 1% over the past 60 days. Over the past year, the company’s shares have rallied 7.9%.

Lazard Ltd LAZ has a Zacks Rank #2 and Growth Score of B. Its earnings estimates for 2018 have risen 3.2% in the past 60 days. Moreover, shares of the company have gained 11.1% over the past year.

Carrying a Zacks Rank #2 and a Growth Score of B, Great Elm Capital Corporation’s GECC current-year earnings estimates have moved 27.6% upward over the past 60 days. Further over the past six months, stock has gained 3.5%.

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