The UK market has lagged behind other countries in recent years, as Brexit and other variables have spooked investors. Many companies in the FTSE 250 are now looking like bargains, with limited analyst coverage giving a real edge to investors willing to research. I’ve found one company in the index that I really like the look of.
Investment manager Man Group (LSE:EMG) has a lot for investors to be excited about. The company provides a range of funds, and is the world’s largest publicly traded hedge fund. Hedge funds are generally well out of the reach of most investors, but an investment in Man Group could be an exciting way to tap into this.
What makes it even more interesting is its link to the University of Oxford. This puts a range of machine learning and analytical tools at the service of the hedge fund manager, and as a result brings some of the most sophisticated tools to the general public.
Gains made at the start of the year were wiped out as performance fees declined significantly amid the US banking crisis, but many similar companies have seen much more volatility throughout.
How about the fundamentals?
The investment management world can be difficult to understand, since valuations are driven by the performance of investments. However, at a price-to-earnings (P/E) ratio of 8.2 times, Man Group appears to be well below competitors in the FTSE 250, with the sector average at 43.8 times.
With the share price currently at £2.23, a discounted cash flow calculation of future cash flows suggest there could be growth of 57% before the fair value of £5.10 is realised. As noted, this is driven by how investments are expected to perform over coming years. However, with the P/E significantly below levels seen in the last five years, and with the company expecting earnings to grow by 12% per year, I feel like there is room to grow here.
Why else might I invest?
Of all the companies in the FTSE 250, Man Group ranks 57th in terms of dividend yield, at a healthy 5.6%. This isn’t spectacular, but is generous for a growing company making a profit.
In today’s high interest rate environment, having high debts can be the stumbling block for companies. Man Group has more cash reserves than debts at present, bringing a level of control for the future as competitors may struggle.
The firm has stated in their 2Q earnings:
“I’m delighted to report record assets under management of USD151.7 billion, and net inflows of USD2.6 billion. These flows were 2.5% ahead of the industry, highlighting the broad-based demand we are seeing for the range of differentiated investment strategies and solutions that we offer.”
With confidence strong in the company internally, and with demand growing, I think the future looks good for Man Group.
Am I buying?
I really like what I see with Man Group. Of all FTSE 250 companies I’ve looked at, there always seems to be something which convinces me not to progress with an investment. However, the fundamentals, the story, and the future of Man Group tells me that an investment could well be a winner. I’ll be buying shares at the next opportunity.
Gordon Best has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2023