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.
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.
Never assess a stock’s fundamentals without looking at the chart too. Combining fundamental analysis with charting can yield powerful results.
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Editor, Money Morning