What does BT Investment Management do?
As the name suggests, BT Investment Management [ASX:BTT] is a fund manager. It has a significant presence in Australia and, via its 2011 purchase of J O Hambro Capital Management, has a growing business in the UK and Europe too.
BTT’s strategy is to continue this growth via the US market, where it is currently underrepresented.
What’s happening to BTT’s share price?
Today, BTT’s share price jumped more than 6%. It announced a solid increase of $4.2 billion in funds under management over the March quarter, to $91.2 billion.
This translates into an annualised increase in fee income of $9.7 billion. Because funds management businesses are highly scalable, increases in revenue like this come at very little additional cost, meaning much of that increase will flow through to bottom line profits.
As you can see in the chart below, after correcting lower from mid-November to February, BTT’s share price has been working steadily higher. Today’s rally is bullish and suggests you’ll at least see the price challenge the recent high of around $11.50, reached in November 2016.
Source: Bigcharts
What now for BTT?
BTT benefits from rising equity markets, so if the bull market continues profits should continue to grow. Its expansion into the US presents both a risk and an opportunity.
But judging from the share price, investors see more opportunity than risk right now.
BTT isn’t cheap. It trades on around 20 times FY17 earnings. But strong growth is expected in the next few years and funds management businesses are highly profitable once they reach a decent size, which BTT now has.
In my view the share price is headed higher in the short term.
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Greg Canavan
Editor, Money Morning
Greg Canavan is a Feature Editor at Money Morning and Head of Research at Fat Tail Investment Research.
He likes to promote a seemingly weird investment philosophy based on the old adage that ‘ignorance is bliss’.
That is, investing in the Information Age means you have all the information you need at your fingertips. But how useful is this information? Much of it is noise and serves to confuse, rather than inform, investors.
And, through the process of confirmation bias, you tend to read what you already agree with. As a result, you often only think you know that you know what is going on. But, the fact is, you really don’t know. No one does. The world is far too complex to understand.
When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases.
Greg puts this philosophy into action as the Editor of Crisis & Opportunity. As the name suggests, Greg sees opportunity in a crisis. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines traditional valuation techniques with charting analysis.
Read correctly, a chart contains all the information you need. It contains no opinions or emotion. Combine that with traditional stock analysis and you have a robust stock-selection strategy.
With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the basic, costly mistakes that most private investors do every time they buy a stock.
To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Money Morning here.
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