Brokerage firm A.G. Edwards
Revenue actually declined by 2% from last year's level and by 5% sequentially. On the expense side, compensation expenses were down 3%, and non-compensation expenses dropped 5%.
Although declining revenue is seldom good news, I think that investors do have some reason to be happy with the makeup of that revenue. Though commission revenue dropped 12% and principal transaction revenue fell 26%, asset management revenue climbed 14%.
Revenue from asset management fees and services has been climbing steadily and making up an increasing percentage of the overall total. And that's no accident -- A.G. Edwards' management has certainly been targeting the growth of this business.
I believe that will prove to be a solid strategy as time goes on. Asset management is generally a more stable business than the commissions business is, and it's a bit less mercenary. Many investors will switch brokers in a heartbeat for slightly lower commissions or margin interest rates, but investors on the asset-management side tend to develop stronger relationships with the company and are less likely to leave just to save a couple of bucks.
Oddly enough, there aren't too many companies quite like A.G. Edwards left these days. True, giants like Citigroup
Even amongst similarly sized companies, there are differences. Legg Mason
In any case, A.G. Edwards has some room for improvement -- particularly on the margin and return-on-equity lines -- but growing the asset-management business should help. Though the stock doesn't look like a compelling bargain today, the company is improving itself, and sheer scarcity value alone might make it interesting to a larger suitor some day.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).