This ASX financial share should be 127% higher: fund manager

This stock could be extremely cheap according to Ellerston.

| More on:
A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The ASX financial share Insignia Financial Ltd (ASX: IFL) could be incredibly cheap according to a fund manager from Ellerston Capital.

For readers who don't know what this business does, it's a significant player in the retirement and asset management space.

It has three main segments, the first is that it offers platforms for advisers, their clients and hundreds of employers in Australia. Second, it provides financial advice through its large network of financial advisers. Third, it offers asset management products that are designed for an investor's needs.

Is the ASX financial share cheap?

According to reporting by the Australian Financial Review, fund manager Chris Kourtis from Ellerston Capital believes that Insignia Financial is "one of the cheapest financials in the world." Kourtis said he would go "blue in the face buying that stock every day."

The ASX financial share has fallen over 33% in 2023 to date, as we can see on the chart below. It's also down by more than 25% from 23 August 2023.

It was recently announced that Insignia Financial's CEO Renato Mota will leave the business in February. When the boss leaves it can be a bit destabilising for a business – will the business continue its strategy and performance?

How is the company performing?

Insignia Financial recently gave its quarterly update for the three months to September 2023 as it makes "strong early progress on achieving its FY24 to FY26 strategic initiatives to strengthen and simplify the business, reduce costs, and improve growth momentum."

In terms of the cost optimisation program, the business says it's delivering benefits. It's on track to realise $60 million to $70 million this financial year and $175 million to $190 million of gross annualised benefits over FY24 to FY26.

However, in the latest quarter, it saw net outflows of $1.4 billion, which was mainly down to platform net outflows of $1.3 billion, which was largely due to MLC Wrap ahead of the migration.

Funds under management and administration (FUMA) reduced by $1.9 billion (a reduction of 0.6%) to $293.1 billion as at 30 September 2023.

How far could the ASX financial share rise?

Fund manager Kourtis suggested that the business should be trading at $5 rather than just over $2 like it is right now. That means the Insignia Financial share could rise by over 120%.

He said:

We're long and wrong at the moment, but I'll stand by my statement: that is a cheap stock.

The company has borne the pain, and it's now time to milk the cow, but the market is not rewarding because it's had negative momentum.

I'm all about buying the long and not having the time horizon of a gnat, which is what the market has currently.            

There's always day traders running amok, but I'm taking a 30-year view. I think a lot of these guys take a 30-second view.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Financial Shares

a group of business people sit dejectedly around a table, each expressing desolation, sadness and disappointment by holding their head in their hands, casting their gazes down and looking very glum.
Financial Shares

Guess which ASX 200 stock crashed 8% on Thursday

It wasn't a happy day for this company's stock.

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Financial Shares

Why QBE shares could deliver huge returns for investors that buy them today

Goldman Sachs thinks this stock could offer big returns

Read more »

A large transparent piggy bank contains many little pink piggy banks, indicating diversity in a share portfolio
Financial Shares

Considering investing in AFIC shares? Here's what you're buying

This LIC has a very diversified portfolio. What’s in it?

Read more »

A man looking at his laptop and thinking.
Financial Shares

Medibank shares dip as huge potential fines loom from 2022 data breach

The regulator has stepped in on the case.

Read more »

A man in a business suit and tie places three wooden blocks with the numbers 1, 2 and 3 on them on top of each other on a table. representing the most traded ASX 200 shares by volume today
Financial Shares

3 reasons to buy QBE shares right now

Analysts have highlighted why they think this insurance giant could deliver big returns.

Read more »

Hand of a woman carrying a bag of money, representing the concept of saving money or earning dividends.
Financial Shares

An insider just bought $100,000 of Magellan shares: Should you invest too?

This insider appears to believe the fund manager's shares are good value after recent weakness.

Read more »

A woman with a sad face stands under a shredded umbrella in a grey thunderstorm
Financial Shares

IAG shares caught in a storm as millions join 'loyalty' lawsuit

Allegations levelled at this insurance giant could lead to a costly exercise.

Read more »

An older couple use a calculator to work out what money they have to spend.

AMP shares lower amid industry 'wave' of superannuation payouts to baby boomers

New APRA figures show a surge in superannuation benefits paid in lump sums and pensions.

Read more »