Market Overview

Citigroup's Potential Pair Trade On T. Rowe Price And Affiliated Managers Group


William Katz of Citigroup on Thursday introduced a potential pair trade between Overweight-rated Affiliated Managers Group, Inc. (NYSE: AMG) and Underweight-rated T. Rowe Price Group Inc (NASDAQ: TROW) given a “favorable trade-off” between the two asset managers.

Katz offers four reasons:

  • Affiliated Managers is better aligned to the “shifting landscape” for asset managers given its global boutique alpha generation platform as opposed to T. Rowe Price's “Style-Box” profile.
  • The near-term flow dynamics tilt in Affiliated Managers' favor.
  • Affiliated Managers offers better “bang for the buck” capital return along with a superior earnings per share compounded annual growth rate through 2017.
  • Relative upside favors Affiliated Managers.

“T. Rowe Price has proven defensive historically around market volatility and trades at a lower EV/EBITDA multiple relative to AMG,” Katz wrote. “However, we see AMG's model as increasingly resilient to market dynamics; both are equity-centric (immunizing flow rotation risks)' while both would seemingly benefit from a pickup in domestic equity inflows.”

Shares of Affiliated Managers are Overweight rated with a $250 price target, while shares of T. Rowe Price are Underweight rated with an $80 price target.

Latest Ratings for AMG

Apr 2020Keefe, Bruyette & WoodsUpgradesMarket PerformOutperform
Mar 2020Barrington ResearchMaintainsOutperform
Mar 2020Deutsche BankMaintainsHold

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Posted-In: Asset Managers Citigroup William KatzAnalyst Color Analyst Ratings Trading Ideas

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