The group formerly know as BT Investment Management, but now rebranded as Pendal Group Ltd (ASX: PDL) is down 8% to $8.55 today after disappointing investors and Credit Suisse analysts with its funds under management (FUM) update for the quarter ending March 31 2019.
Pendal released the update prior to the market’s open last Friday, but the stock closed relatively flat at $9.30 to suggest that today’s big falls are the result of a broker downgrade by Credit Suisse according to Motley Fool writer James Mickleboro.
Apparently Credit Suisse have cut their valuation of Pendal shares to $7.80 and retained an ‘underperform’ rating after the update. This is still around 10% below the level the shares are trading at today.
For the quarter Pendal grew FUM $8.1 billion to $100.9 billion with net inflows of $1.4 billion, the difference being made up by a strong quarter for equity markets and weaker Australian dollar that boosted FUM irrespective of flows.
Pendal also flagged that Westpac Banking Corp (ASX: WBC) plans to pull $1.5 billion from the Westpac legacy book over April.
While the stock has plunged today on the back of a broker downgrade its operational performance remains reasonable and sell side brokers aren’t always correct in their short term advice.
In fact in July 2018 Morgan Stanley put an “underweight rating” and $20 share price target on Magellan Financial Group Ltd (ASX: MFG), before it went on to nearly double in 9 months to $40 and pay $1.64 in dividends along the way.
This shows how a short-term focus and lack of experience can lead to money-losing calls, with the risk being that today’s seller of Pendal shares are also too short-term focused.
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You can find Tom on Twitter @tommyr345
The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.