The Times - UK (2022-04-04)

The chief executive of Raymond
James, the American wealth man-
agement group, has said his firm
could become one of the five biggest
players in Britain.
Paul Reilly, who paid £279 million
in cash for Charles Stanley in
January, said that he had not ruled
out making further acquisitions in
the UK.
Speaking hours before Royal Bank
of Canada, one of his biggest rivals,
agreed a £1.6 billion deal to buy
Brewin Dolphin, Reilly said that he
regarded the UK as a key market for
expansion. “There may be firms that
fit,” he said of potential acquisitions,
but for now he was concentrating on
integrating Charles Stanley into the
wider group.
Raymond James, which is based in

America’s Raymond James

aims for slot in UK top five

Florida and listed in New York, is a big

player in the United States and

Canada with $1.2 trillion of client

assets under management and a

market value of $23 billion. While

predominantly managing money for

private clients, it also has a fund

management division, a capital

markets advisory wing and it owns its

own bank.

It is in the process of integrating

Charles Stanley, a stalwart of the

British private client world founded

in 1792, with its existing wealth man-

agement business in the UK. That

would take some time, Reilly said, but

he added: “We think we can be signifi-

cant [in the UK]. There’s no reason

why we couldn’t be top five some day.”

Raymond James including Charles

Stanley puts itself at No 12 in the UK

with combined assets under manage-

ment of about £42 billion. The

Charles Stanley deal boosted its UK

assets under management by £27 bil-

lion from £15 billion.

On present market share numbers,

getting to No 5 would place it above

Rathbones and Brewin and within

striking distance of AJ Bell, though

still well behind St James’s Place and

Hargreaves Lansdown.

Reilly said he was minded to push

deeper into the direct-to-consumer

sector, investing more in Charles

Stanley Direct, a platform for DIY

investors that would put it head-to-

head with lower-cost platforms

such as Hargreaves Lansdown and

Interactive Investor, abrdn’s new

acquisition.

Reilly said that it could take five

years to find a British acquisition. “In

the meantime, we’re not going to sit

around, we’re going to recruit and

grow,” he said.

Patrick Hosking Financial Editor

36 Monday April 4 2022 | the times

It’s rare that the unloved London
stock market has an edge on its
American counterpart, yet the
remarkable recovery that has
succeeded heavy selling in the wake
of Russia’s invasion of Ukraine has
left New York’s indices trailing.
The FTSE 100 and FTSE 250
have recovered all the ground lost
since the end of February, with the
former having gained just over 2 per
cent since the start of this year.
Meanwhile, the Nasdaq Composite
index is still 9 per cent below the
level at which it started the year.
What explains the difference?
The British market’s bias towards
commodity and banking stocks,
which are viewed as beneficiaries of
rising inflation and interest rates.
Banks, miners and oil and gas
companies account for roughly
30 per cent of the market
capitalisation of the FTSE 100.
In contrast, technology-heavy US
indices have suffered as investors
turn away from stocks highly rated
for future growth.
“If you think about inflation, it’s
quite divisive in equity markets,”
Thomas Moore, a fund manager at
abrdn, said. “You’ve got companies
that will be seeing rising input
costs... and then on the other side
you’ve got companies that are direct
beneficiaries of that.”
Discounts attached to some
corners of the equity market have
extended naturally towards
investment trusts. Those baked into

Volatility in markets

is revealing hidden

value for investors

Auto Trader 25.59 10.1% 1.2%

Ashtead 19.83 19.6% 0.9%

Electrocomponents 20.91 10.8% 1.5%

TwentyFour Income 4.5* 7.5%** 6.0%

Thriving under pressure

*Discount to NAV. **Last year's NAV growth

Forward price/

earnings ratio

Earnings per

share growth

Dividend

yield

Commodities are

doing well for now, but

it pays to dig a little

deeper, writes Tempus

editor Emma Powell

Companies with better-quality

earnings streams and growth

prospects are often accompanied by

valuations that can be prohibitive to

investors. We’ve taken a look at

some of those companies that look

oversold.

Ashtead

Shares in the equipment rental

group have been sold off since the

start of this year amid concerns

about the health of the American

economy. But for those willing to

take a medium-term view, Ashtead

stands to benefit from rising rental

rates and demand in its core US

market, amid a shortage of heavy-

duty equipment and the restart of

live events and construction

projects.

Last month the company raised

its rental revenue guidance for this

year, prompting analysts to upgrade

earnings forecasts for this year and

the next. Rising rental rates thus far

have offset the pinch of a higher

wage bill and increasing fuel costs,

while the group’s heft has

strengthened its buying power. A

price/earnings growth ratio of 0.69

indicates that the stock’s growth

potential has not been fully

appreciated by the market. A ratio

below one is thought to indicate

that a stock is undervalued.

domestically focused small and

mid-cap UK equities have widened

in recent weeks, reflecting caution

around companies that could be

squeezed by weaker consumer

discretionary spending.

So, too, have those for specialist

technology trusts. “One area that

has lots of sensitivity to discount

rates is tech,” Mick Gilligan, head

of managed portfolio services at

Killik and Co, said. Analysts have

been increasing their discount

rates in recent weeks to take

account of rising interest rates. “I

sense that we are not at the end of

that yet,” he said.

Does that mean that investors

should pile into banks and

commodity stocks? Not necessarily.

Yes, they look cheap and are

forecast to pay out generous

dividends. But those valuations also

reflect caution around either the

security or longevity of those

payouts. For banking groups, in

particular, there is the risk that

rampant inflation results in an

increase in bad debts, or that a

darkening economic outlook forces

central banks to hang fire on

raising rates as quickly as

anticipated.

Yet there is another way that the

broader volatility that has hit

markets could expose value.

Business