The Australian Ethical Investment Limited (ASX: AEF) share price is up 7% today to close at $4.74 per share, just shy of its 52-week high of $4.75. Overall, the fund is up 173% within the last 12 months and up 99% within the last 3 months.
The primary focus of Australian Ethical is to provide superannuation and managed funds that are invested in growth companies that are sustainable and delivering social good to the community they operate in.
What’s driving Australian Ethical’s share price growth?
Australian Ethical’s 2019 Annual General Meeting (AGM) on 24 October last year was an apparent catalyst for the upwards trend. The presentation at the meeting delivered some astonishing metrics that the market took kindly to. The following day (25 October), the AEF share price lifted 6% on the news and then another 7% on 26 October 2019.
Here are some key metrics from the AGM:
- Funds under management (FUM) in 2019 is up 21% to $3.42 billion
- Net flows are steadily growing and the fund not been net negative for the last 4 years, proving investors are happy with their decision to be with Australian Ethical Investment’s funds.
- Record membership acquisition in September 2019 of 1,273 new members
- The fund produced 70% less CO2 than the benchmark of other managed funds.
After the AGM, several positive announcements were released by the company that encouraged the company’s strong upwards share price trend to continue.
The first notable announcement was on 5 December 2019, where Australian Ethical released an earnings guidance for the 6-month period ending on 31 December 2019. The guidance report estimated an increase of net profit after tax year-on-year of 38%, or 30% when compared with the first half of 2019. The company attributed this substantial growth to the large increase in funds under management.
The second wave of announcements was in relation to AEF’s position as a substantial shareholder of several other listed companies. It’s an ASX rule that companies must disclose to the market their investment in other companies, particularly when the investment is a substantial portion of the company’s listed equity. For example, the announcement on 16 December 2019 disclosed to the market that AEF was now a substantial shareholder of Rhipe Limited (ASX: RHP), with a 5% stake in RHP’s fully paid ordinary shares.
Australian Ethical’s share price has done very well in the second half of 2019 and is positioned to continue growing throughout 2019. Its market capitalisation is still relatively low for a funds management company, which makes me extremely optimistic for where the share price could be in 12 months’ time. With all the news coverage of the severe bush fires and other climate events recently, I foresee that the retail interest of ethical investing will just keep on rising.
AEF receives a screaming BUY from me with a minimum 12 month holding period. Happy bidding!
The post Why I think the Australian Ethical share price is screaming BUY appeared first on Motley Fool Australia.
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Jack Kaminski has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Australian Ethical Investment Ltd. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020