Is Affiliated Managers Group (AMG) a Smart Long-term Buy?

Longleaf Partners Fund, a Memphis-based fund under Southeastern Asset Management, recently released its Q3 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 7.21% for the quarter, underperforming its benchmark, the S&P 500 Index which returned 8.93% in the same quarter. You should check out Longleaf Partners’ top 5 stock picks for investors to buy right now, which could be the biggest winners of 2021.

In the Q3 2020 Investor Letter, Longleaf Partners’ highlighted a few stocks and Affiliated Managers Group Inc. (NYSE:AMG) is one of them. Affiliated Managers Group Inc. (NYSE:AMG) is an international investment management company. Year-to-date, Affiliated Managers Group Inc. (NYSE:AMG) stock gained 17.1% and on December 16th it had a closing price of $99.20. Here is what Longleaf Partners’ said:

“AMG (-8%, -0.46%), the asset management holding company, was the top detractor as the company reported net outflows for the quarter. Over 95% the net outflows came from quantitative strategies, which represent only approximately one quarter of AMG’s total AUM and less than 5% of proportionate EBITDA, meaning that the majority of the company’s affiliates and earning power did not shrink organically. Market appreciation helped AMG’s AUM grow 6%, and our appraisal of the value increased 10% due to the higher recurring fee revenues and substantial FCF in the period. The stock trades at a 5x FCF multiple, which would suggest a permanently impaired, shrinking business. Yet AMG’s alternatives managers, particularly its private equity firms, reported an encouraging $3bn of net inflows with long lock-ups. CEO Jay Horgen intelligently repurchased discounted shares at a 6% annualized pace, while borrowing 2030 bonds at a 3.3% coupon and 2060 bonds at a remarkable 4.75%. The encouraging performance from most affiliates and the extreme spread between the stock’s 20% earnings yield and low cost of long-term debt suggest a substantial mispricing of the equity.”

In Q2 2020, the number of bullish hedge fund positions on Affiliated Managers Group Inc. (NYSE:AMG) stock remained unchanged from the previous quarter (see the chart here). Our calculations showed that Affiliated Managers Group Inc. (NYSE:AMG) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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Disclosure: None. This article is originally published at Insider Monkey.