Unfortunately, the latest quarterly results leave a lot to be desired. Year to date, net income was down 30.6% to $25.8 million, while revenues remained unchanged at $102.4 million year over year. Even worse, assets under management experienced another quarter of almost $500 million in outflows, bringing total outflows to $1.2 billion year to date. The last straw for shareholders might be the cut in the quarterly dividend to $0.23 a share from the $0.30 the company had paid quarterly since 2001.
With a performance like that, it's not surprising that management is finally making long-awaited changes. While management has consistently recognized the fact that attracting new assets has been a problem, it has not completely rectified the problem. The new initiatives include significantly reducing fees and adding an international fund to W.P. Stewart's offerings. This strikes me as a few years too late, because many other noted managers such as Third Avenue Funds and Dodge & Cox launched international funds years ago and have attracted billions in new assets.
W.P. Stewart does have an outstanding long-term track record: It has a compounded return of 18.3% after fees since 1975, vs. 13.3% for the S&P 500 over the same time. Despite the recent difficulties, the company still has outperformed the S&P 500 over the past five years after fees as well. For potential shareholders, though, beating the indexes doesn't mean a whole lot if you can't leverage that into new profit-generating assets.
On that score, W.P. Stewart management gets an F. That's why I'm inclined to believe that even if large-cap stocks rebound, as Philip and many other astute investors expect, W.P. Stewart will still be unable to spin that boost into any kind of meaningful increase in assets.
For the past few years, competition in the large-cap world has been heating up, with not only hedge funds entering the game, but private equity as well -- in a big way. Not to mention, other asset managers like Eaton Vance
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