Gray Panther on the Prowl
12/22/2010 4:47 pm EST
The venerable financial advisory firm Ameriprise is cheap and growing by leaps and bounds, writes Charles Carlson in the DRIP Investor.
With approximately 10,000 people in the US turning the age of 60 every day, Ameriprise Financial (NYSE: AMP) should find plenty of demand for its services.
The company offers financial planning, asset management, and insurance products with a focus on meeting the retirement needs of “mass affluent individuals.”
The company has put up nice profit numbers in recent quarters, and record profits are expected this year and next. The stock has performed well [and in fact is trading today near its 52-week high and just below $58 per share—Editor.]
To be sure, the stock will be influenced by general market trends, and bear markets are not typically friendly to stocks such as Ameriprise. However, with the Dow Theory giving bullish indications for the market, and the “graying of America” providing a steady flow of prospects, the company’s long-term outlook appears healthy.
The company offers its services through more than 11,000 financial advisors in 3,600 offices. It has broadened its asset-management services with the acquisition of Columbia Management. The deal establishes Ameriprise as one of the ten largest managers of long-term mutual fund assets in the US.
Great Growth, Cheap Stock
The bounce in the stock market in 2009 and this year has helped revive the company’s profits. Indeed, after a miserable 2008 in which Ameriprise lost $0.17 per share, profits jumped to $2.95 per share in 2009. The consensus earnings estimate for this year is $4.42 per share, and that may prove conservative. Indeed, Ameriprise crushed the consensus earnings estimates in each of the last two quarters. For 2011, profits should top $5.20 per share.
Based on the 2010 earnings estimate, the stock trades at less than 12 times earnings. That seems a reasonable valuation given the company’s sharply rising bottom line. The jump in profits should help fund dividend increases. The current quarterly dividend of $0.18 per share yields 1.2%. The dividend was boosted by some 6% earlier this year, and I would expect another hike in the 6% range or greater in 2011.
Finding quality plays in the financial sector is not so easy right now. Ameriprise offers a nice solution for investors who want exposure to financial stocks but don’t want the risks that many financials, especially the banks, pose at this time.
The Scoreboard Doesn’t Lie
Ameriprise’s Quadrix scores are outstanding, with an Overall score of 97 (out of a possible 100) and excellent scores in such important categories as Value (87), Momentum (96), and Performance (78). [Quadrix is a valuation system that rates stocks on 100 criteria in seven distinct categories—Editor.]
Investors could step up purchases on pullbacks to the mid-$40s. Ameriprise offers a direct purchase plan whereby any investor may buy shares directly from the company.
[Last month, Carlson recommended Walgreen’s (NYSE: WAG) below $35 a share. Those shares are soaring 6% to more than $39 today after the drug chain handily beat profit estimates. Earlier in the year, Paul Larson profiled the biggest asset manager of them all, while Benjamin Shepherd suggested two other major players in the industry—Editor.]