Westwood Holdings Group (WHG) provides investment management services to institutional investors, private wealth clients and financial intermediaries, notes Ingrid Hendershot, a leading value-focused money manager and editor of Hendershot Investments.
For more than three decades, Westwood's disciplined, conservative investment process has consistently provided solid performance. Its investment approach is designed to preserve capital during unfavorable periods and provide superior real returns over the long term.
Despite the ongoing active vs. passive investment management debate, Westwood has generated strong growth over the last five years. Sales have compounded at a 10% annual rate with net income growing at a 3% annual rate while dividends grew at a healthy 12% annual clip.
Assets under management (AUM) have steadily grown from $18.9 billion at the end of 2013 to a record $24.2 billion as of 12/31/2017. Westwood has diversified their AUM by adding products that cannot be easily replicated passively. Since 2013, Westwood has introduced ten new product offerings with a new flexible income strategy expected to be launched later this year.
Future growth drivers include global expansion through ramping up European and third-party partnerships; digitization of the firm’s business to appeal to millennials who will become 75% of the global workforce in seven years; and shifting from a pure investment management focus to goals-based wealth management which includes financial planning.
Westwood’s operations are highly profitable with net profit margins averaging nearly 20% during the last five years. The business also generates high levels of free cash flow as capital expenditures are minimal.
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Westwood returns significant cash to shareholders through dividend payments. Since going public in 2002, the firm has paid over $170 million in dividends, more than three times the company’s initial market capitalization. In 2018, Westwood increased its dividend 10% to $2.72 per share, providing investors with a generous 4.9% dividend yield based on the current stock price.
In 2017, Westwood Holdings was recognized as one of the best places to work in the asset management business for the fourth consecutive year, owing, in part, to Westwood’s equity-based compensation program.
Other Westwood Holdings owners include GAMCO Investors and Royce & Associates. These investment groups share Westwood’s value-oriented approach, as do we.
Long-term investors should consider investing in Westwood, high-quality company with strong growth, highly profitable operations, strong free cash flows, a high dividend yield and high insider ownership.
