The Financial Grimes: Burford Capital and cheap trackers

by Jeremy Grime, an ii contributor |

This top City analyst reviews the financial sector stocks making headlines today.

Jeremy Grime spent 15 years as a financial sector analyst, working at Altium Capital, RBC Capital Markets, Panmure Gordon and most recently as Director of Research at finnCap. Jeremy is also a qualified accountant.

Jeremy's blog is written with more experienced investors in mind. However, we have included a brief glossary at the bottom of the page to help those less familiar with some of the language used. For more on key financial metrics and valuation ratios click here.

The Rise of the Trackers

  • This interesting chart from Bloomberg shows the growth in market share of the ETF tracking funds since 2014.

  • Conclusion Perhaps Standard Life Aberdeen (LSE:SLA) should look at launching an ETF portfolio. It gets harder to differentiate as fund managers get larger. In this new world only the specialist of the scaled can survive. But the scaled need to be offering cheap products such as ETFs.  Standard Life Aberdeen are still calling themselves value investors, which is the wrong style in a low interest rate world, as well as the product being more expensive than ETFs.

 

Burford Capital – Market Manipulation RNS  

Share Price: 860p

Mkt Cap: £1,858 million

Conflict Disclosure: No Holding

Burford Capital (LSE:BUR) is a litigation finance company, providing funds to bankroll expensive lawsuits.

  • Statement Burford has found evidence of market manipulation after a weekend when Gotham City published its concerns over the answers given on the Burford analyst call, which included concerns that Burford stated they "are lawyers; therefore we are trustworthy". I am tempted to do a twitter poll on who agrees with that statement. They believe that spoofing and layering may have occurred, and that share price declines were not caused by actual shares traded.
  • Valuation The shares remain at 1.4X book value, which equates to a PER of 6.8 and yield 1.4%
  • Conclusion It looks like instead of investing in other third-party litigation cases, they are now intent on investing in their own, thereby rendering the shares almost uninvestable. Especially when the directors have bought stock recently, thereby intending to capitalise on this apparent market manipulation.
Glossary
PBT profit before tax
EPS earnings per share
DPS dividend per share
ROE return on equity
EBITDA earnings before interest, tax, depreciation and amortisation
PER price earnings, or PE ratio
Yield dividend yield
FCF free cash flow
NAV net asset value
Price/Book (PB) a company's share price versus what it owns
Book Value a company's worth after subtracting debts and liabilities from assets
AUM assets under management
FUM funds under management
OTC over-the-counter
FCA Financial Conduct Authority
ESMA European Securities and Markets Authority

For information about Jeremy's 'deep dive' company analysis, you can email him at jeremy@charltonillingworth.co.uk

Jeremy Grime is an independent equity markets analyst and freelance contributor, not a direct employee of interactive investor.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation, and is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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