The past year has been a volatile one for asset managers like Affiliated Managers Group (AMG), which is a collection of hedge funds, including AQR, and mutual fund operators, like Tweedy Browne, explains Mike Cintolo, editor of Cabot Top Ten Trader.

It’s not news the inflation-driven bear market has affected investment returns and sparked investors to pull their money from funds. That makes AMG’s third quarter earnings beat all the more impressive.

Recently announced Q3 results saw the business post a 1% revenue gain over 2021 at despite the tough environment, while earnings per share of $4.21 lifted 5% and topped expectations by 31 cents. The downside was net outflows across the business, which put average assets under management nearly 10% below 2021 levels.

Management points to its diverse business model of different strategies which allow the overall company to do well in all types of markets. At its most basic, about half of its assets (52%) are invested in equities, 41% in alternatives with its hedge fund group and the balance in fixed income.

Despite the asset outflows, Affiliated says it continues to see good traction in growth areas such as high net worth management and ESG investing — it owns ESG fund leader Parnassus — which should provide for long-term growth rates in the teens.

More immediately, the company sounded an upbeat note in its earnings call, expecting fee revenue to jump as market-besting strategies come to fruition. Results have also been helped by a $500 million share buyback this year.

All in, Wall Street doesn’t see much growth, but the fact that earnings have remained elevated leaves a low valuation (8x earnings), and if the market turns up, growth could get back on track.

Technically, AMG declined steadily from its peak near $190 to a low around $110 in July, with a retest of that level a month ago; it had been trading beneath its 40-week line for months as investors expected business to sag.

But the Q3 report (and the market’s recent uptick) has helped perception. AMG decisively took off following the earnings report, not just booming price-wise but on its heaviest weekly volume since February 2021. We suggest aiming for dips, but we’re not expecting a big retreat.

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