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Coverage Initiation – Invesco Ltd.
Value Line recently initiated coverage of Invesco Ltd. (IVZ), a large publicly owned investment manager. It is headquartered in Atlanta, GA and employs more than 6,100 individuals. The company can trace its roots back to 1935, and the stock is a component of the S&P 500 Index.
Invesco was first incorporated (1935) as H. Lotery & Co. Ltd. under the laws of England and Wales. Over the next several decades, helped by international expansion, the company grew materially. In the 1960s, it expanded into the Asia-Pacific region, in 1978 it opened offices in the United States, and Canadian operations soon followed. In the 1980s and 1990s, the corporation was aggressive on the acquisition front. It acquired Britannia Arrow Holdings, a fund management, banking, and insurance group. With this deal, the company was now listed on the London Stock Exchange. It enhanced its fixed income operations by the 1990 purchase of PRIMCO Capital Management and its real estate business was bolstered by some smaller deals.
The merger activities continued throughout the 1990s and into the new millennium. During this time, the company was known as AMVESCAP. In 2006, it acquired PowerShares Capital Management, which greatly expanded the company’s exchange traded funds (ETFs) operations. One year later, AMVESCAP went through a major rebranding and restructuring. It changed its name to Invesco Ltd. and moved its stock listing to the New York Stock Exchange. In 2008, the stock was added to the S&P 500. Acquisitions continued, and most recently (in 2010), it acquired Morgan Stanley’s (MS) retail asset management business.
The company is an independent global investment manager. It primarily provides its services to high net-worth individuals and manages accounts for institutions. Invesco currently operates in more than 20 countries, and as of December 31, 2011, had more than $625 billion in assets under management.
Invesco operates in a very competitive industry, with many companies offering similar products and services. Other investment management firms, commercial banks, investment banks, broker dealers, and hedge funds all serve as rivals. Thus, in order to remain relevant and profitable, it is imperative that Invesco continue to offer quality products and good customer service, as well as focus on retaining its solid reputation. Asset management companies commonly sustain material fund outflows when they fail to serve their customers properly.
The strength of the global economy also plays a major role in the success of asset managers. For instance, during the 2007-2009 recession, Invesco, like most other companies, struggled mightily. Housing prices were falling, unemployment was rising, and the possibility of a total economic collapse appeared possible. During this time, the major U.S. equity indexes were incredibly volatile, with the Dow Jones Industrial Average commonly moving by 300 to 500 points daily. Thus, a large percentage of customers emptied their investment portfolios in an attempt to reduce risk and minimize losses. Invesco experienced hefty net outflows, and assets under management fell materially. During this time, from 2007 to 2009, annual revenues declined by more than 30%. On the bright side, the situation improved in 2010. A total collapse was avoided, and since then, for the most part, the global economy is improving. As a result, investors reentered the markets, and net inflows picked up steam. Last year, Invesco’s top line came in at almost $4.1 billion, an all-time high for the company. The stock price, which fell to around $8.40 in 2008, has rebounded to pre-recession levels, as well. All told, when evaluating Invesco or any other asset management company, it is vital to acknowledge the fact that economic conditions can heavily influence their level of success. Military conflicts and political unrest can also weigh on operations.
As mentioned, since 2007, Invesco Ltd. has been trading on the New York Stock Exchange. In 2009, it completed an equity offering, where 28.6 million shares were sold to the public at an average price of $14 a share. Another offering occurred in November, 2010. At that time, 30.9 million shares were sold at $21.48. On both occasions, Morgan Stanley was part of the underwriting syndicate. These events helped Invesco improve its financial position during the recession and enabled the company to continue its focus on expanding its business via acquisitions.
At this time, Invesco’s balance sheet appears solid and in 2011, management authorized a share-repurchase program. The dividend, which was cut in 2009, has been increased of late, and it appears that top brass is focused on returning cash to shareholders. For a detailed evaluation of Invesco’s current business prospects and the equity’s investment merits, subscribers are advised to monitor our regular quarterly coverage in The Value Line Investment Survey, while keeping an eye out for Supplementary Reports when breaking news takes place.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.