Per media release, Principal Financial Group Inc. (NASDAQ:PFG) is set to buy India-based Punjab National Bank's minority stake in a joint venture. With the acquisition, the investment manager will have complete possession of Principal-PNB Asset Management Co and Principal Trustee Co. Financial terms of the transaction remain undisclosed.
Principal-PNB Asset Management Co is the joint venture through which Principal Financial offers mutual funds and asset management services in India. As of Dec 31, 2016, this Zacks Rank #2 (Buy) investment manager had 78.6% stake in the joint venture.
Principal Financial has always pursued strategic acquisitions to accelerate growth, expand globally and add capabilities to its portfolio. Last October, the company had announced to buy MetLife (NYSE:MET)'s Afore business in order to widen its presence in Mexico and ramp up growth in mandatory pension business as well as in voluntary long-term savings and mutual funds.
Asia is an emerging economy and is considered a potent market for growth. Hence Principal Financial is no exception in tapping opportunities from this region. In fact the company had acquired AXA’s Mandatory Provident Fund (MPF) and Occupational Retirement Schemes Ordinance pension business in Hong Kong in September 2016. Utilizing its Chinese footprint, Principal Financial offers mutual funds and asset management service in the country through a joint venture, CCB Principal Asset Management Co., Ltd.
In order to grow inorganically, management utilizes a significant portion of its operating earnings for mergers and acquisitions and intends to continue in the same direction. Also, Principal Financial estimates spending 65-70% of net income on quarterly dividends, strategic buyouts and share buybacks besides deleveraging its balance sheet. For 2018, the company targets a capital deployment of $0.9-$1.3 billion in such activities.
Shares of Principal Financial have rallied 19.1% in a year’s time, underperforming the industry’s 28.5% increase. Also, there was no earnings momentum over the last 60 days. Nonetheless, we expect a strong segmental performance, growing assets under management and a solid capital position to drive the shares higher.
Stocks to Consider
Investors interested in investment managers can look at Legg Mason, Inc. (NYSE:LM) , Apollo Global Management, LLC. (NYSE:APO) and Affiliated Managers Group, Inc. (NYSE:AMG) .
Legg Mason is a publicly owned asset management holding company. The company delivered an average four-quarter positive surprise of 23.46%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Apollo Global Management is a publicly owned investment manager. The company came up with an average four-quarter positive surprise of 34.19%. The stock carries a Zacks Rank #2.
Affiliated Managers Group operates as an asset management company providing investment management services to mutual funds, institutional clients and high net worth individuals in the United States. The company pulled off an average four-quarter positive surprise of 2.06%. The stock carries a Zacks Rank of 2.
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Legg Mason, Inc. (LM): Free Stock Analysis Report
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Principal Financial Group Inc (PFG): Free Stock Analysis Report
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