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16 June 2019
By Maynard Paton
Today I have revisited a share screen that applies two ratios favoured by ‘quality’ investors — operating margin and return on equity (ROE).
The exact criteria I re-used were:
1) An operating margin (latest and 10-year average) of 20% or more, and;
2) An ROE (latest and 10-year average) of 20% or more.
This time I have pinpointed Jupiter Fund Management, a £1.7 billion fund manager with a mighty 41% operating margin and a robust 24% ROE.
Read my full Jupiter Fund Management article for SharePad.
Maynard Paton
Wouldn’t you be better off with the platform providers as opposed to the actual fund managers? The advantages being their higher customer retention rates, less emphasis on fund performance while still being immensely profitable. I prefer Hargreaves Lansdown (despite the current noise) and Integrafin above Jupiter simply because customers are fickle and its easy to change funds but much more of an aggravation to change platforms.
Hello John
Thanks for the comment. Yes, the likes of HL should have less emphasis on ‘star’ fund managers doing well and ought to be more predictable for the reasons you mention. The differences are reflected in the respective company valuations. I wrote about HL here. I would argue a proportion of HL’s success has been due to customer inertia and suspect marketing.
Maynard
Thanks for the reply – yes the valuation is always the difficult part.