Stocks In Focus: AMP, May 28 2025

0:28A listener production. Hello, Scott. How are you? Mate, I'm very, very well. We're going to talk about one of the most historic names, I'm going to say, in Australian finance. The company known once upon a time as the AMP, such was its ubiquity. Now, of course, we just call it AMP. But it's got a bit of a big history. Before I let you get into that, Vincent, I am going to just quickly do our boilerplate, which is important boilerplate, and I have to do it, but it is serious, so please do pay attention. Firstly, whatever we say after this, or anything for the Motley Fool, is always general advice, not personal investment advice.

1:00That means whatever we think, whatever we say, we think is right now, but we can't know if it's right for you personally. We'll give you a view on a company or an issue, but we can't tell you whether you should do what you should do on the basis of that view. Secondly, we are recording this about the middle of May 2025. Things change. And so the views, the information, the circumstances are as at the time of recording. The internet's forever and that's fine. We'll stand behind it as at that point in time, but things will change. So if you're watching or listening to this months or years hence, you're warned.

1:30Just recognise things will and do change. We're long-term investors at the Motley Fool, by the way. We do have long-term views, and we'll hear one of those from Vincent today. But this is not, again, to say that things can't and won't change, even in the short term. Sometimes prices or circumstances do change. We have to change our views, and that's the only responsible course of action. But that's the context into which we are making these, providing this information, providing this context, this analysis. All right. That's out of the way. AMP, Vincent, you want to start with a bit of a pot of history.

1:58Let's do that. I think there are a few companies on the stock exchange that elicit an emotive response. Maybe BHP is maybe the only other one. Because in some ways, the history of AMP is the history of Australia. It started in the mid-19th century, set up as a mutual organization, basically to help Australians, like life insurance. There was a physical life insurance salesman that would often go around and collect it. But life was a lot more uncertain then. Life insurance was perhaps even more important than it was now. That's really where it grew its reputation. It truly helped in nation building, I think.

2:38And then as Australia grew, so did A &P. It lasted about 140 years as a mutual organization, growing mainly in the insurance space. But as it grew, it suddenly moved more into superannuation and investment management. And it needed or it felt it needed to have better access to capital markets. So then it demutualized. It listed on the Australian and the New Zealand Stock Exchange. And that gave it more access to capital markets to expand mainly into asset management. It had a few issues, though. So that's really the issue started after the demutualization with kind of a lot of change in strategies.

3:27Of course, most famously the Royal Commission, where it was found to have done various things like, you know, selling to dead members. but it kind of so it sold a bit of soul searching sold off a lot of its companies including its life insurance arm where it started its asset management company and various other arms and international exposure so now it's significantly reduced it really has its financial services which is a shell of what it used to be it has a banking arm a small banking arm that's kind of bolted on, and it has still part of A &P Capital, which really is in runoff. Really the assets that didn't transition across when it sold, for example, its property capability to Dexas or some other capabilities to Macquarie.

4:24So that's really the history of A &P, which in some ways is the history of Australia. Yeah, nice, mate. Lovely summary. The Australian Mutual Providence Society was what A &P used to stand for. I happen to know that because my parents met at the AMP way back in the 1970s. So there you go. That's a maybe 60s. That's a just for what it's worth. Let's not talk about it. Let's talk about AMP, the company. You've given us a really nice summary. I think probably what I'm hearing a lot of there is it really failed to genuinely kind of move with the times. It was the dominant national name in finance in Australia, maybe apart from the Commonwealth Bank back in the 80s.

5:00And since then, as things moved and they kind of tried to do a bit of this and a bit of never really landed in one particular place. And so you're right, they've got something bolted on, something hived off. It's hard to kind of know what the AMP is or wants to be. And I guess that's been partly responsible for the share price. It's been a pretty constant decline and a pretty precipitous one over the past 20 or 30 years. I agree, Scott. I mean, I think when a company's had a lot of changes, one way to look at it is you look at the company from scratch and go, would I start a company from scratch that looks like this company?

5:33If you look at A &P now, kind of a small financial services company now with a kind of bank bolted on and a few residual assets. It'll be hard to argue, I think, that you would start a company that looks like that now. I think the big issue A &P had was times changed and A &P didn't. It was too small to compete against the Black Rocks and the CBAs that had the capital base, the economies of scale that could run assets a lot cheaper than AMP. But it wasn't big enough. It wasn't small and nimble enough to be like a fintech can be very specialist at a very small core subject. So I think that's the crux of the situation now.

6:20It's still in that soul-searching mode, if you say, and it still needs to prove that it's got a consistent strategy, I would say. Nice. Now, that takes us perfectly from the past and the present into the future because it doesn't really matter what's happened in the past. All that matters for investors is the price I'm paying now and what the business does from here. So let's do that, mate. Let's talk about the pros and the cons. Why would an investor consider investing in AMP shares today? On the pro side, as you say, it has been beaten down a lot. So to some extent, there's a clean slate. If management proves it's got a consistent strategy, it's a lot cheaper than it used to be.

7:01And it's got rid of some of its left for a reason, some people might say. It's what they used to call slightly disvaluing sometimes years ago, that cigar butt stage. If it's cheap enough, there's some value there. That's the pro, I think. If it comes up with, maybe it's successful in AI or something, or some more niche part of the market where it's got a competitive advantage, and management can demonstrate that it can do that, prove out on it. Nice, mate. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

7:42let's talk about the cons why would you stay away from amp as an investment i think the cons really relate to what i've mentioned before that it doesn't seem to really know what it is and it can't you know it's a tiny little bank small financial services and a few rats and mice assets so it's hard to um have a compelling case on how it could compete against the black rocks for example, or CBA, or how it could be the fintech with a killer new app or new way of looking thing. It's kind of in them. It hasn't got the capital heft to develop great IT systems and that, and yet the management's a bit slurotic.

8:26It's got the management of Westpac, but the capital capability of a small cap. So that, I think, will present challenges unless it can prove out on something. makes it a tough situation. Of course, the price always matters. Let me then ask you, we don't do formal recommendations, by the way, in this Stocks in Focus series. If you want formal Motley Fool recommendations, you can obviously join our services. Our marketers would love it if you did. But if you don't want to do that, or maybe you just want to see a little bit more, every month we produce Motley Fool Stock of the Month, and that's only on YouTube.

8:56So if you're listening to this on the podcast, jump over there. Make sure you check out the YouTube channel because Stock of the Month, every month we do produce. Pull back the curtain on one recommendation from the Motley Fool universe. Why? Because we like giving you stuff for free, but also gives you a chance to look behind the curtain a little bit and understand the sort of companies, the analysis, the approach we take to that. That said, mate, so I'm not going to ask you for a formal recommendation, but what do you recommend? We're long-term investors. Let's take a five-year view. Over the next five years, does AMP beat the market?

9:22Is there enough pups left in that cigar to give us market-beating performance or is it destined to always be an also-run? Looking at the company now, I would have to take the down, Scott, and say no. It's had, since it's divested of its assets, it's had quite a few years to reinvent itself. And there's been no compelling strategy that's kind of shown the path forward. In fact, it's changed its strategy quite a lot. So I would say no to that. There's no compelling reason, obvious reason that it will be a market beater over the next five-year period. And certainly the performance today, it hasn't suggested it's going to turn out anytime soon.

10:03but anything is possible. So that's Vincent's view. Hey, before you leave this video with this podcast, do us a favour. Subscribe to both the YouTube Motley Fool Australia, so Fool AU YouTube channel. Hit subscribe, hit like, hit like the video too if you don't mind if you're watching this on YouTube. Subscribe while you're here. Hit the notification bell so you get all the good stuff that's coming, including that stock of the month and lots of other things. I did a piece recently on tax that got quite a few views and a bit of commentary. So you'll get lots of good stuff from us, not just me, mostly not me actually, other people on the Motley Fool YouTube channel.

10:32And if you're not yet subscribed to the podcast, go to Motley Fool Money. And there's two of those. There's an American one and an Australian one. We're the Australian one. Producing consultation with listener. And subscribe to that one three times a week. Once we do the Stocks in Focus, two other episodes a week. You can get lots of good stuff. And it's all free, by the way, from the Motley Fool. All right, that's it, Vincent. Thank you for sharing your expertise with me and with our viewers and listeners. Fools, thanks for watching and listening. We will see you next week in the same place. Until then, Fool on.

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