The Financials sector and capital markets stocks have suffered in 2022. The SPDR S&P Capital Markets ETF (KCE) is down more than 20% so far this year and is already off 11% from its mid-August peak while the Financial SPDR ETF (XLF) is actually beating the S&P 500 ETF (SPY) YTD. An industry downtrend is clearly in place, so a cautious stance is warranted as we head into the notoriously volatile month of August.
Capital Markets Struggles Vs Financials & The S&P 500
According to Bank of America Global Research, Invesco (NYSE:IVZ) is a global asset manager with over $1.5 trillion in AUM and more than 8,000 employees globally, with a presence in over 20 countries. The company provides investment management services to institutional and retail clients across different asset classes, including fixed income, equity, alternatives, balanced/multi-asset, and money market funds. In October 2020, activist investor Trian Fund Management (Trian) announced that it has acquired 9.9% stake in Invesco.
The Atlanta-based $7.5 billion market cap Capital Markets industry company within the Financials sector trades at a nice 6.9 trailing 12-month price-to-earnings ratio and sports a hefty 4.7% dividend yield, according to The Wall Street Journal.
On valuation, BofA analysts see earnings dipping this year, but then recovering modestly in 2023 before an acceleration in 2024. The Bloomberg consensus estimates are more upbeat, though. Invesco’s dividend yield is expected to vary in the 4.2% to 4.7% range, so that is somewhat unstable.
IVZ: Earnings, Valuation, Dividend Yield Forecasts
Looking ahead, Invesco has a dividend payable date of Friday this week. Next Friday, the company will issue important interim data – its August AUM figure, according to Wall Street Horizon. After a tumultuous month, seeing how fund flows shook out will be key for the stock. Its next earnings date is unconfirmed for Tuesday, October 25 BMO.
Invesco’s Corporate Event Calendar
The Technical Take
I went long term with the chart of IVZ. There is key support over the past 11 years in the $14 to $15 area. The stock first held that mark way back during the European debt crisis of 2011. After rallying above $40 in 2014 and 2015, the late-2018 bear market took the stock ultimately back down to $15. It held that spot on a test about three years ago, then a major bearish breakdown took place during the Covid crash. After initially pausing there two years ago, shares finally rose above the mid-teens on their way to almost $30. Then came the bear market of 2021 and 2022. The stock found buyers again at $15 earlier this summer.
IVZ rallied to $19, another important spot on the chart below, but now appears poised to test $150 again. The play here is to go long in the $15s with a stop under $14. Long-term investors should avoid the stock until it climbs above $19-$20, but it must also bust through a downtrend line off the mid-2021 peak as well as its downward-sloping 200-day moving average.
IVZ: Key Support At $14-$15, Resistance Near $19 With Downward Momentum/Trend
The Bottom Line
Invesco looks like a value trap to me. While its P/E is low and the dividend yield is high, significant bearish near-term momentum could be a big headwind. There’s solid support in the mid-teens though, so that could be a good spot to pick up shares, but a sell stop should be placed under $14. Long-term investors should wait for a trend change before building a position.