The increased demand for asset management solutions in developing countries and manufacturing industries. Amid this, let’s look at three quality asset management stocks: Diamond Hill Investment Group, Inc. (DHIL), Silvercrest Asset Management Group Inc. (SAMG), and Westwood Holdings Group, Inc. (WHG), which seems to have caught investors’ attention.
Although the U.S. inflation rate has slowed to 4%, down from its 40-year high, it remains above the Fed’s desired 2% level. As investors face a challenging economic backdrop, with recessionary forecasts from institutional investors, the need for asset management services is evident.
The global asset management market is poised to expand at a CAGR of 35.1% from 2023 to 2032, reaching $7.55 trillion by 2032. The increased demand for optimal asset utilization, the need for efficient tracking and management of assets, and a desire to minimize maintenance downtime are the factors propelling the market’s growth.
In addition, adopting industrial asset management solutions is becoming increasingly common across manufacturing industries. Also, the integrated use of advanced technologies such as artificial intelligence, machine learning, and 5G technologies and the rising need for the real-time monitoring of industrial assets across multiple industries is driving the growth of cloud-based industrial asset management.
The global industrial asset management market is estimated to accelerate at a CAGR of 12.2%, registering revenue of $14.40 billion by 2029.
Let’s take a detailed look at the stocks mentioned above:
Diamond Hill Investment Group, Inc. (DHIL)
DHIL operates as an investment advisory and fund administration services provider through its wholly-owned subsidiary, Diamond Hill Capital Management, Inc. It sponsors, distributes, and offers investment advisory and related services to its clients through pooled investment vehicles, including the Diamond Hill Funds, separately managed accounts, and model delivery programs.
On June 16, backed by its strong cash flows, it paid a quarterly dividend of $1.50 per share. The company’s annual dividend of $6 per share translates to a 3.37% yield on prevailing prices. Also, its four-year average dividend yield is 9.48%.
In terms of trailing-12-month EV/EBITDA, DHIL is trading at 8.82x, 29.4% lower than the industry average of 12.49x. Likewise, its trailing-12-month EV/EBIT multiple of 9.03 is 32.3% lower than the 13.34x industry average.
DHIL’s revenues amounted to $33.99 billion in the fiscal 2023 first quarter (ended March 31, 2023). Its attributable net income improved 39.2% from the year-ago value to $12.71 billion, while its earnings per share came in at $4.20, up 46.3% year-over-year.
During the same period, its Assets Under Management (AUM) and Assets Under Advisement (AUA) combined were $26.7 billion, compared to $26.6 billion as of December 31, 2022.
DHIL’s revenue and net income have increased at CAGRs of 2.5% and 3.6% over the past three years, respectively. Likewise, its EPS has grown at a CAGR of 7% in the same period.
The stock’s trailing-12-month ROTA of 18.77% is significantly higher than the 1.12% industry average. Also, its trailing-12-month ROCE and ROTC of 25.02% and 17.87% are 125.3% and 243.1% higher than the industry averages of 11.10% and 5.21%, respectively.
Over the past month, the stock has gained 13.9% to close the last trading session at $178.18.
DHIL’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality and a B for Momentum. Out of 54 stocks in the Asset Management industry, it is ranked #2. Click here to see the other ratings of DHIL for Growth, Value, Stability, and Sentiment.
Silvercrest Asset Management Group Inc. (SAMG)
SAMG is a wealth management firm that provides financial advisory and related family office services in the United States. The company serves ultra-high-net-worth individuals and families, as well as their trusts, endowments, foundations, and other institutional investors. It also manages funds of funds and additional investment funds.
The company’s four-year average dividend yield is 4.39%, and its forward annual dividend of $0.72 translates to a 3.44% yield on prevailing prices. Its dividends have grown at 5.1% and 6.7% CAGRs over the past three and five years, respectively. On June 16, it paid its shareholders a dividend of $0.18 per share of Class A common stock.
In terms of forward EV/Sales, SAMG is trading at 1.86x, 35.9% lower than the industry average of 2.91x. Its forward EV/EBITDA and Price/Sales multiples of 6.50 and 1.60 are 39.4% and 28.8% lower than the industry averages of 10.72x and 2.25x, respectively.
For the first quarter that ended March 31, 2023, SAMG’s total revenue amounted to $29.43 million. Its adjusted net income and EPS came in at $5.04 million and $0.35, respectively. As of March 31, 2023, SAMG reported a total AUM of $29.90 billion and a discretionary AUM of $21.30 billion.
The consensus EPS estimate of $0.39 for the fiscal third quarter (ending September 2023) represents a 13.7% growth year-over-year. The consensus revenue estimate of $31.37 million for the next quarter indicates an 8% increase from the same period last year. The company has an impressive revenue surprise history, surpassing the consensus revenue estimates in three of the trailing four quarters.
In terms of trailing-12-month ROCE and ROTC, SAMG’s 16.95% and 9.41% are 52.6% and 80.6% higher than the industry averages of 11.10% and 5.21%, respectively. Likewise, its trailing-12-month ROTA of 8.10% compares to the industry average of 1.12%.
Over the past three years, its revenue and net income have increased at CAGRs of 3.3% and 5.1%, respectively. Also, its EPS has grown at a 2.3% CAGR in the same period.
SAMG’s shares have gained 29.8% over the past three months to close the last trading session at $20.90.
SAMG’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system. It also has a B grade for Momentum, Stability, and Quality. Within the same industry, it is ranked #4.
Beyond what is stated above, we’ve also rated SAMG for Growth, Value, and Sentiment. Get all SAMG ratings here.
Westwood Holdings Group, Inc. (WHG)
WHG is a focused investment management boutique and wealth management firm that offers investment advisory services to institutional investors, private wealth clients, and financial intermediaries. Its segments include Advisory and Trust.
The company’s four-year average dividend yield is 10.42%, and its forward annual dividend of $0.60 translates to a 4.53% yield at the current price level. It is expected to pay a quarterly dividend of $0.15 per common share on July 3, 2023.
In terms of trailing-12-month EV/sales, WHG is trading at 1.09x, 64% lower than the industry average of 3.04x. Its trailing-12-month Price/Sales and Price/Cash Flow multiples of 1.40 and 2.69 are 39.8% and 57.1% lower than the industry averages of 2.33 and 6.28, respectively.
During the first quarter (ended on March 31, 2023), WHG’s total revenues increased 32% year-over-year to $22.73 million. Its income before taxes rose 150.8% from its year-ago value to $1.49 million. The company’s non-GAAP economic earnings increased 89.4% year-over-year to $3.59 million, while its economic EPS stood at $0.45, up 87.5% from the prior-year quarter.
In addition, firmwide assets under management and advisement totaled $16.20 billion at quarter end, consisting of AUM of $15 billion and AUA of $1.20 billion.
Its EBITDA and EBIT have increased at CAGRs of 12.5% and 21.3% over the past three years, respectively.
WHG’s trailing-12-month asset turnover ratio of 0.54x is 168.7% higher than the 0.20x industry average.
The stock has gained 26.7% over the past six months to close the last trading session at $13.25.
WHG’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system.
It has a B grade for Growth and Momentum. Among 54 stocks in the same industry, it is ranked #3. Click here to see the additional ratings for WHG (Value, Stability, Sentiment, and Quality).
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DHIL shares were trading at $178.18 per share on Tuesday afternoon, up $0.68 (+0.38%). Year-to-date, DHIL has declined -1.97%, versus a 14.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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