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Insiders Target Focus Financial (FOCS) Amid RIA Consolidation

by | Aug 17, 2021

Focus Financial (FOCS) a high-quality name back at an attractive spot and seeing a rare, sizable open market buy last week from director Kristine Mashinsky of 20,000 shares at $49.85, a nearly $1M investment. Shares are consolidating in a multi-week bull wedge under $52 and recent 52-week highs up near $56.50. A move higher targets $67-$68. The $3.56B company trades 11.3X earnings, 2.33X sales, and 25X cash with double-digit growth. FOCS provides wealth management services to primarily ultra-high and high net worth individuals. Their services include everything from investment advice to tax planning and services. The company is coming off a strong quarter with record new adds, especially among wealth managers, which is expanding their services revenue. They continue to see a lot of opportunity to consolidate the highly-fragmented RIA industry which is continually seeing older advisers retire and establishing next-gen succession plans. FOCS expects to continue deploying capital with their M&A pipeline at record levels and building, as they noted in August:

“The strong secular tailwinds drive growth and consolidation in the wealth management industry haven’t changed irrespective of the short-term dislocations such as COVID or the potential change to the capital gains tax rate. The fiduciary model increasingly resonates as the broader shift to fee-based services and the demand for greater transparency continues. This is especially true among ultra-high net worth and high net worth clients who are sophisticated consumers and value having an adviser who can provide highly personalized, integrated advice delivered via open architecture. According to a recent Echelon Partner study, many firms are currently experiencing the highest level of organic growth and market appreciation in their history. The great migration of client asset flows into this industry will continue for years to come, creating an almost infinite runway of opportunity for us, both in the U.S. and internationally.”

Analysts have an average target for shares of $59 and a Street High $65. KBW raising their PT to $61 earlier this year citing a strong outlook for organic revenue growth. Hedge fund ownership fell 20% last quarter. Azora Capital a top buyer.

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