The abrdn (LSE: ABDN) share price started in November at 164p and ended at 194p. That’s an 18.3% gain, which is not too shabby. Before I try to answer why that happened, some context is needed. The stock price of this global asset manager is still below where it was a year ago. Looking back five years and the return is still negative.
This stock used to be a FTSE 100 member. It was kicked out in August 2022 after its market cap dipped below requirements. The recent good performance, which actually started in October 2022, has it poised to rejoin the UK’s flagship index. So it’s well worth asking why this has been happening.
A rising market lifts all stocks
Did the market go up in November? That’s a good place to start. The FTSE 100, the FTSE 250 — abrdn’s current index — and the FTSE All-Share all rose about 5.35% in November. Why is that important? Well, abrdn has a market beta of 1.41, so I would expect it to have done about 1.41 times, as well as the market did in November (it also works the other way, unfortunately), which is about 7.5%. Although the market helped lift this stock last month, It appears it outperformed in November.
Next, I can look at the company’s investor relations website and RNS feed. Aside from a dividend payment in September, the last information of note was the firm’s half-year results, released on 9 August 2022. After the release, the abrdn share price rose but then resumed its downtrend until 12 October 2022, when the current bull run started. So, there is not much to explain the 18% stock price rise in November.
Sins of the sector
Whereas indexes like the FTSE 100 have nearly recovered their losses for the year, asset managers like abrdn remain underwater. The company has constantly been in the UK’s top 10 shorted stocks list this year. Ashmore, a specialist emerging markets investment manager, is another name the short sellers have been going after. Hargreaves Lansdown in another.
If poor sentiment dragged asset managers like abrdn down more than the market in the earlier parts of the year, it might be improving sentiment that is lifting them higher than expected now. All asset managers are dealing with the rise of cheaper, passive alternatives, like index tracking funds. Building an investment case for asset managers is difficult when all asset prices are heading straight down, which has been the case. Since I can find no company-specific news to explain abrdn’s November price rise, I would venture that it’s a combination of the market rising and improving sentiment, particularly for asset managers.
Where next for the abrdn share price?
So long as the market continues to rise and asset managers, and probably financial service firms in general, remain in favour, the abrdn share price will probably continue to rise. There are also some things I would keep an eye on specific to abrdn. One is the performance of its portfolios, which investors questioned, and they will want to see a turnaround. Branching out into wealth management via the acquisition of Interactive Investor might be a sound move, but only time will tell for sure.
The post Why did the abrdn share price rise 18% in November? appeared first on The Motley Fool UK.
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James McCombie has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.