Amvescap

Amvescap (AVZ) is an asset management company. AVZ uses the brands AIM, INVESCO and Atlantic Trust. It operates in around 20 countries in Asia, Europe and North America.

AVZ has a market cap. of £3.5 billion and a yield of 2.3%. Rather worryingly the EPS has decreased year on year in 2004 and 2005 but is forecast to rise 15% in 2006.

A quick look at the latest interim report did not give any clues as to why the EPS has been declining. I did notice that the first thing the chairman talked about was the new CEO rather than the financial results. This is not a good sign. Obviously the board are relying on the new CEO to turn things around and do not want the results in the spotlight. I would rather rely on a fantastic business model and an average CEO than vice versa.

When analysing a company for the first time I find it helpful to ask myself "why should I invest in AVZ and not XXX?" In this case I would compare it with the Royal Bank Of Scotland which is one of my favourite UK blue chips at the moment. AVZ has a forward PE of 18 compared to 9 for RBS. I know AVZ is forecast to grow earnings by 15% next year but is this sustainable? RBS is only forecast to grow earnings by 8% next year but this is compensated for by a yield of over 4%.

Thinking about the wealth management business model I do wonder if the trend is for more people to do it themselves. Certainly the advent of the Internet has meant that information that only used to be available to those with a Bloomberg terminal is now available to everyone and people can manage their finances from the comfort of their own home.

So I do not think there is a tail wind behind this business. In the absence of any WOW factor about AVZ I will move in and search for riper fruit.