FOR A FIRM WITH $419 BILLION IN ASSETS under management, a host of well-known brands in the fund industry and a reach that is literally global, Atlanta-based Invesco still isn’t what you’d call a household name.
But that is changing under the leadership of president and chief executive Martin Flanagan, who first focused on getting costs in line after taking the helm in 2005. He now has moved to boost Invesco’s profile by expanding its investment offerings and improving its performance, which could leave its shares (IVZ) set to outperform in the next year. Even without a brokerage business or a retail-banking presence, Invesco is sure to attract lots more attention — from customers as well as investors.
Some industry analysts and investment professionals expect the company’s stock to rise about 45%, to 31 per share or more, from a current 21.50, on strong earnings growth, which could prompt an expansion in its price/earnings multiple. Invesco is inexpensive at around 16.5 times earnings, which is close to the low end of its historic multiple range of 15 to 20 times, and a discount to its peers.
Invesco is “well positioned to continue to generate above-average assets under management and earnings growth,” says Michael Kim of Sandler O’Neill & Partners, a Manhattan-based investment banking and research firm specializing in financial services. Kim has a share-price target of 31, based on his estimate that the firm will deliver $1.31 a share in earnings in 2010, factoring in some contribution of the recently announced acquisition of Morgan Stanley’s retail asset-management business, including the Van Kampen funds, set to close in the second quarter. For 2011, Kim sees earnings of $1.67 a share.
Lisa Dong, portfolio manager at Westwood Management in Dallas, is also a fan. She sees the shares headed to the 36-to-37 range in the next three years on the potential for earnings to reach $2.23 to $2.25 a share, based on conservative estimates of market growth and asset flows. As Dong sees it, what started as a turnaround story has evolved into an exciting play on growth.
Since Flanagan came aboard, Invesco has added the Powershares Capital Management family of exchange-traded funds to its lineup, giving it instant exposure to the fastest-growing part of the fund industry and buttressing its established brands — including Invesco Aim funds in the U.S.; Invesco Trimark in Canada and Invesco Perpetual in the U.K. The company diversified its offerings even further when it acquired the institutional private-equity capabilities of WL Ross & Co., headed by Wilbur Ross, an investor renowned for his worldwide restructuring expertise in such fields as textiles, coal, steel, autos and financial services.
Another bold stroke came in October, when Invesco inked a deal to buy the aforementioned Morgan Stanley/Van Kampen business, for stock and cash valued at $1.5 billion. The transaction will add meaningfully to the firm’s offerings by lifting its presence in fixed-income funds, particularly municipal-bond funds, and balancing its growth-oriented funds with a line that is more value-focused.
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