Affiliated Managers Group (AMG): Here’re Longleaf’s Thoughts on Investment Management Firm

Longleaf Partners Fund, a suite of mutual funds and UCITS funds managed by Southeastern Asset Management, recently published its Q4 investor letter. The fund discussed its performance as well as a few companies – including Affiliated Managers Group (NYSE: AMG) – in the letter. In this article, we’re going to take a look at the fund’s comments on AMG, which offers investment products to mutual, institutional and high net worth investors.

Here is what Longleaf said about the investment management company:

Affiliated Managers Group (-32%, -1.37%, -28%, -1.16%), the owner of diverse investment firms, declined following our third quarter purchase and was among the Fund’s notable 2018 detractors. We purchased AMG, which we previously owned, in the third quarter. Asset-manager stocks fell as indices went down in the fourth quarter.

AMG’s intrinsic value is not tied to index performance, but instead to the differentiated outcomes at concentrated value managers (like ValueAct and Yacktman), quantitative strategies (AQR and Winton), international stock pickers (Tweedy Browne and Harding Loevner) and several other strong funds not directly correlated with public equities or fixed income.

The various managers within AMG have long-term records of outperforming the S&P 500 that should drive asset growth, as should expanded international distribution. We have solid partners in CEO Nate Dalton and CFO Jay Horgen, a business that can grow with minimal capital and a deeply discounted stock.

Covalis Capital's Returns, AUM and Holdings

For the fourth quarter of 2018, Affiliated Managers Group (NYSE: AMG) reported a loss of $151.3 million, or loss $2.88 per share, compared to net income of $315.4 million, or $5.50 per share, for the same period of 2017. Consolidated revenue was $564.4 million, down from $604.1 million in the same period of 2017. For the year ended December 31, the company had net income of $243.6 million, versus $689.5 million for the same period of 2017. Consolidated revenue was $2.4 billion, compared to $2.3 billion for 2017.

Shares of the investment management firm are up 8.48% this year. But, the stock had a very disappointing performance in 2018, with the share price falling 52.01% over the year. Analysts polled by FactSet have a consensus average rating of ‘OVERWEIGHT’ and a consensus average price target of $121.38 on the stock, which was closed at $106.56 on Monday.

Meanwhile, Affiliated Managers Group (NYSE: AMG) isn’t very popular stock among hedge funds tracked by Insider Monkey. Our database shows that 32 funds held the stock at the end of the third quarter of 2018. Crazy investors include Chiron Investment ManagementSoutheastern Asset Management, and Ariel Investments.

Disclosure: none