Is Liontrust Asset Management's share price in for a bumpy ride?

Liontrust Asset Management (LON:LIO) is classified as a 'High Flyer' stock: a heady mix of high quality, high momentum, and low value.

Some of the market's biggest multibaggers were a High Flyer at one point or another, but beware - this is a dangerous (if potentially lucrative) part of the market to play in.

Liontrust Asset Management is a mid cap stock in the Investment Management & Fund Operators industry. When we analyse Liontrust Asset Management from a factor perspective, we find that it has a: 

• Quality Rank of 90,
• Momentum Rank of 99, 
• Value Rank of only 25. 

This is the classic factor profile of a High Flyer.

A combination of high quality, high momentum and low value is great when earnings go up but a bad place to be when things go wrong. The higher they rise the harder they fall, after all.

Liontrust Asset Management: flying high but is it safe?

So, High Flyers tend to be riskier and more volatile than the market average. But is this true of Liontrust Asset Management?

We can find out quickly by applying Stockopedia’s RiskRatings system, which divides stocks into five groups according to stock price volatility. The five classifications (from most to least volatile) are:

• Highly Speculative (30% of the market),
  
• Speculative (25% of the market), 
• Adventurous (20% of the market),
• Balanced (15% of the market), and
• Conservative (10% of the market)

Liontrust Asset Management is an adventurous stock. This means that the group is in the more volatile half of the market in terms of stock price volatility, as might be expected of a High Flyer. Those looking to invest here should prepare themselves for a potentially bumpy ride.

One thing in Liontrust Asset Management’s favour is its above average five-year return on capital employed figure of 31.2%. Being consistently profitable to such a degree over multiple years suggests that Liontrust Asset Management can back up its favourable factor exposures with some kind of economic moat and, hopefully, make any share price volatility more bearable in the short term.

This attractive blend of factors and profitability characteristics has been noticed by the market - Liontrust Asset Management has a one-year relative strength of 22.8%.

Find the rockstars of the stock market

High Flyers are great stocks to have in your portfolio if you think you need more momentum or quality - just look out for signs that momentum might be changing. If you want to see which other stocks qualify as High Flyers, you can find a comprehensive list on Stockopedia's StockRanks page.

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