Wednesday tips round-up: Henderson Group, AO World

Shares in fund manager Henderson Group may look primed for a fall, but that may be misleading. True, the bulk of its assets are mainly in equities and fixed income, especially in the UK and US, and it has a large exposure to retail investors. To all of that one might add the stock’s current generous valuation, which stands at 17 times earnings versus a five-year average of 13. However, the firm has been diversifying towards the US and most recently Australia.

On 2 June the outfit unveiled three small acquisitions Down Under which took its Asian assets to 11% of the group total from 5%. Nevertheless, better disclosure on price and profitability would help. The company’s aim is to double overall assets under management to £127bn by 2018. Scale alone may not be enough to see the company through if the core equity and fixed income markets turn. However, thus far this year it has kept the money coming despite a lacklustre start to 2015 for both of those asset classes. As well, it shares trade at a discount to those of its listed peers in Australia, the Financial Times’s Lex column points out.

The shares of AO World have been a flop since they began trading on the stock market. Those of its rival, Dixons Carphone, on the other hand, have surged by 50% this year. The white goods retailer’s sales grew almost 24% in the year to March, but its previous growth rate of almost 40% seems to have almost halved. Furthermore, the company faces challenges. Nonetheless, the shares continue to trade at 52 times’ 2016 earnings’ forecasts. Such a valuation is to be expected more from a high-tech champion. There’s more downside to come and some observers believe even a rights issue isn’t out of the question should it continue to haemorrhage cash at the current pace. So avoid, writes The Times’s Tempus.