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I tend to buy high quality stocks when I think they look cheap. And that’s exactly what I think about me. abrdn (LSE: ABDN) share price now.
abrdn shares have been declining all year. And on Wednesday morning, they fell another 4% in response to the latest UK inflation data.
The investment management business is going through a rough patch. And the first half results for abrdn are not looking pretty.
Fee-based revenue was down 8% compared to the same period last year. When stock prices fall, investment managers can’t charge as much in performance-related fees. Customers also lose money when they spend, and that is happening.
When the company took a big hit Lloyds Banking Group It spent £24.4bn in the half. That stemmed from a dispute over the merger of Standard Life and Aberdeen Asset Management to create the current firm. Lloyds saw a conflict of interest.
But the good news is that Lloyd’s money is the last part. And to put it into perspective, Abrd’s remaining assets still total £508bn.
The bottom line showed an IFRS loss before tax of £320m, which looks bad. But he put Abrid first.”Changes in the fair value of significant investments listed over time“. The company recorded an adjusted operating profit of £115m.
There are good reasons to avoid investing in abrdn shares. Well, for short-term investors, for sure. When big investment companies report their numbers, they don’t look beyond the next quarter or two to see them grab the winners. This could open up opportunities for private investors in the long run.
However, if the first half is hard for abrdn, the second half can be even harder. August inflation was a little less painful than we feared – the 9.9% reported this week was better than forecasts of 10.2%. But the Bank of England reckons a recession is inevitable.
The only real question is how long the recession can last. Oh, and how much money investors can withdraw from asset managers like abrdn. And what impact this might have on stock prices over the next 12 months.
Thinking about the last question, I guess the bad news can be summed up in abrdn’s share price.
In the first half, Abrdn maintained its interim dividend at 7.3p per share. Same as last year. And if it repeats for the second half, we’re looking at a 10% dividend on Aberdeen’s current share price.
That’s not at all certain, and I think a second-half dividend is a real possibility based on half the financial situation. But even if there was no final dividend (which I think is unlikely), shareholders would have pocketed 5 percent this year. And that’s not bad.
We may have difficult times ahead. The company itself says:Current market uncertainty means that our ambitions for revenue growth and an improved cost/income ratio may take longer than originally anticipated.“.
But I invest for the long term. And abrdn is firmly on my list of options for my next investment.