Affiliated Managers Group, Inc. (AMG) Stock Valuation

Affiliated Managers Group, Inc. (AMG) is a U.S.-based asset management holding company founded in 1993 and headquartered in West Palm Beach, Florida. The firm partners with independent investment management companies—called Affiliates—by taking equity stakes while allowing them to remain operationally independent. Through this model, AMG supports over 500 investment strategies across equities, alternatives, and private markets, providing Affiliates with global distribution and capital resources. The company creates long-term value by fostering organic growth, investing in new Affiliates, and returning capital to shareholders.

Bears point out two good points with the scalability of AMG's operations, "As AMG increases in size, it will need to make larger investments (or increase the number of deals it does) to move the needle, increasing the risks associated with its strategy." "AMG's strategy is heavily reliant upon organic growth from its existing cadre of affiliates as well as successful new investments in boutique asset managers." As the company grows, the number of opportunities for the company won't scale as fast, forcing an increase in risk tolerance, which leave opportunity for large losses in times of a market pullback.

Optimistic Case: $302

Baseline Case: $284

Pessimistic Case: $265

Current Price: $260

Modena has decided to not invest into AMG, due to small potential upside, which is contrasted with relatively inconsistent and slow expected growth compared to the asset management industry. With the increased cautiousness about overvaluations and a potential pull back in equities, the volatility in earnings with AMG has us leaning towards the pessimistic case, which leaves basically no room to grow.