Silvercrest Asset Management Group, Inc. (NASDAQ:SAMG) reported Q2 2014 results (press release, SEC filings, conference call). Silvercrest continued good growth in its assets under management (AUM) and revenue. As of June 30, AUM rose to $16.7B, up 3.1% Q/Q and 20% Y/Y, fueled by market appreciation as well as organic growth in the family wealth business. The increase in AUM Q/Q was attributable to $0.5B in market appreciation and $0.1B new client inflows, so the quarter showed some client hesitation, in line with the general stock market weakness in Q2, especially in April and May - as well as in July which will fall into the third quarter. The Y/Y AUM growth was driven by 1.7B market appreciation and $1.1B net client inflows. Revenue grew to $17.2M, up 3% Q/Q and 18.6% Y/Y. Adjusted EPS was $0.21. GAAP EPS was $0.18. Dividend to class A shares was unchanged at $0.12 per share. Cash and cash equivalents were $21.4M and SAMG had notes payable of $8.2M and $3B principal balance of its revolving credit facility with City National Bank. Total stockholders' equity was $41.7M.
The current U.S. stock market dip seems to be over, at least temporarily, so Q3 AUM numbers should be relatively solid. In case of a serious market correction, which I don't expect but can never rule out or predict exactly, SAMG stock is likely to suffer along with other stocks. In the long run, SAMG faces fee margin pressure as industry trends relentlessly steer towards passive investing and as the current longer-than-usual bull market marches on, causing underperformance in many active strategies that otherwise outperform over full cycles that include bear markets.
My long thesis on SAMG is relatively short, but seems to be working well so far with AUM continuing to grow. The stock price is down ~5% amid general stock market weakness which has been largely focused on the smaller of the small-caps, such as SAMG. I reiterate my long thesis as well as the target price of ~$18.4 within a year. Due to potential cyclical stock market headwinds, downside protection using a stop loss should be placed roughly 10% below the current price because SAMG doesn't have options.
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