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After a strong run beginning before Christmas, UK shares have pulled back from recent peaks. Since closing on 3 March, the blue-chip FTSE 100 index has lost 3.9%. Meanwhile, its mid-cap cousin, the FTSE 250, has held up better, slipping only 2.5% since then.
These declines are far smaller than those seen in the US, where two major market indexes entered correction territory (down 10%+). The S&P 500 index currently stands 9.1% below its 19 February high, having fallen 10% below this level on Tuesday, 11 March. The tech-heavy Nasdaq Composite index has fared even worse and now lies 12.9% below its 16 December 2024 peak.
Cheap shares get cheaper
Warren Buffett, my investment hero, once posed this question to investors: “If you’re going to eat burgers for the rest of your life, do you want the price to go up or down?” Obviously, any sensible person would want the price of goods they buy to go down, making them easier to afford.
For me, the same applies to shares — when stock prices fall, I don’t get upset. Instead, I get excited during Mr Market’s occasional meltdowns, as they allow me to buy into great companies at better prices. Thus, when share prices slump, I go hunting for value and income shares to add to my family portfolio.
A FTSE 250 faller
One London share I’ve watched slide is that of Man Group (LSE: EMG). Starting out as a trading house in 1783, Man has grown to become the world’s largest publicly traded hedge-fund provider. Man offers actively managed investment funds in public and private markets to both institutional and private investors.
Man’s shares have slumped over the past year, falling steadily since their one-year high of 279.23p on 4 April 2024. As I write, they trade at 207.86p, down more than a quarter (-25.6%) in 11 months. However, they have easily beating the wider FTSE 250 over the past five years, surging by 106.2%, versus 27.6% for the mid-cap index.
One reason for Man’s share-price weakness could be a decline in its assets under management. At end-2024, these totalled $168.6bn, down from $178.2bn at mid-2024. This was partly due to a $7bn autumn withdrawal from one institutional client.
A dividend delight
Despite its weak shares, Man reported higher pre-tax profits of $398mn for 2024, up 43% on 2023. This success allowed the group — whose market value is £2.5bn — to lift its cash dividend and also launch a share buyback programme worth $100m.
This FTSE 250 firm’s shares now offer a market-beating dividend yield of 6.5% year. That’s well ahead of the FTSE 100’s cash yield of 3.5% a year. And it’s this juicy payout that prompted me to add this stock to our family portfolio in August 2023.Though we are slightly down on this trade, Man’s dividends have pushed this deal into profit.
Of course, as a hedge-fund manager, Man’s strategies can fare badly during market meltdowns and spiking volatility. These conditions caused its stock to plunge in Covid-hit 2020, before it rebounded strongly. Nevertheless, trading on a low multiple of just 10.7 times earnings, this FTSE 250 share looks too cheap to me. Hence, I won’t be selling our stock anytime soon!
