The Abrdn (LSE:ABDN) share price has been on a downward trajectory for some time now. Despite this, the shares look tempting for my holdings, with some excellent fundamentals and future prospects. Should I buy Abrdn shares? Let’s take a closer look.
Abrdn shares continue to fall
As a quick reminder, Abrdn is one of the largest asset management businesses in the UK. It was previously known as Standard Life Aberdeen before it sold Standard Life to Phoenix Group Holdings last year. As an asset manager, it manages global assets including real estate, equities, and private market assets on behalf of its clients.
So what’s happening with the Abrdn share price currently? Well, as I write, the shares are trading for 151p. At this time last year, the stock was trading for 254p, which is a 40% decline. The stock market dip in March saw Abrdn shares fall and they have continued to do so while many other stocks have recovered. Inflationary pressures have not helped.
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To buy or not to buy?
So what are the pros and cons of buying Abdrn shares for my portfolio?
FOR: A core aspect of my investment strategy is to buy and hold for the long term. That means I’m not going to be swayed by short-term issues and investor reactions. Abrdn is one of the largest asset managers in the UK with approximately £370bn assets under management with lots of cash on the books too. Furthermore, its restructure since disposing of its Standard Life insurance arm should support longer-term growth and increased returns too.
AGAINST: As well as geopolitical and macroeconomic factors pushing down Abrdn shares, its half-year report wasn’t the best. It reported that fee-based revenue dropped by 8% and operating profit also dropped by close to 30%. Part of that was caused by Lloyds Banking Group moving assets elsewhere but the total outflow of £35.9bn is a one-off, according to Abrdn.
FOR: At current levels, Abrdn shares look dirt-cheap to me on a price-to-earnings ratio of just six. The FTSE 100 average is 15, meaning the shares could represent value for money just now. Furthermore, they would boost my passive income stream through dividends. A dividend yield of over 9% is enticing, and Abrdn announced an interim dividend of 7.3p in its recent report. I am aware that dividends can be cancelled, however.
AGAINST: Abrdn shares have not been helped by its restructuring due to the sale of Standard Life mentioned above. In fact, it even said in its latest report that due to the current economic volatility, ambitions for growth are likely to take longer than anticipated. I view this as a short-term issue, however.
My verdict
Overall, I believe investor sentiment towards Abrdn has been a bit harsh. I view Abrdn shares as an excellent opportunity to buy cheap, dividend-paying shares in a top FTSE 100 firm. I’d be willing to buy some shares for my holdings. I expect some headwinds in the shorter term but in the longer term, I believe the business will grow, and returns, as well as the share price, will increase.
