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Broadridge Closes Morningstar's Board Consulting Unit Buyout

Broadridge Financial Solutions, Inc. BR seems to be on track to enhance its offerings for mutual fund and investment managers. Its latest inorganic addition is Morningstar, Inc.’s 15(c) board consulting services business. The financial terms of the deal were kept under wraps.

This business segment of Morningstar helps “ boards of directors and executive teams of mutual funds” in meeting their 15(c) fiduciary duties for the process of reviewing and approving the fee related agreements with each investment advisor. The buyout will help Broadridge in better serving its fund board clients.

The company in its press release revealed that, “This acquisition will enable Broadridge to provide its fund board clients the ability to benchmark funds using both Morningstar and Lipper data via an objective, independent source in order to better assess their fund advisors and sub-advisors.”

The acquisition is anticipated to strengthen Broadridge’s ability to provide a comprehensive source for financial data required for the fulfillment of governance related responsibilities by the board of directors of mutual funds.

Dan Cwenar, Broadridge’s head of buy-side data and analytics stated, “This acquisition broadens the breadth and depth of the data-driven solutions Broadridge provides to the investment management industry and underscores our commitment to providing innovative services to help clients get ahead of today’s challenges and capitalize on tomorrow’s opportunities.”

Share Price

Broadridge stock has gained 36.9% over the past year, substantially outperforming the 6.6% rally of the industry it belongs to.



Factors Driving the Stock

Acquisitions have been key catalysts for Broadridge’s growth. Prior to the abovementioned acquisition, the company acquired Summit Financial Disclosure, a provider of financial document management services in October 2017. The company is expanding its product portfolio and customer reach as well as evolving as one of the leading financial and outsourcing services providers on the back of its buyouts. These have also proved to be revenue boosters for the company.

Apart from this, regular additions to the company’s clientele have been tailwinds. In December 2017, the company’s solutions were adopted by a Miami based broker-dealer, Beta Capital Wealth Management as the latter is transforming to a  self-clearing process.

Additionally, the company’s partnerships have also been  driving growth. The company recently joined forces with Wealthsimple, a Canadian digital investing service to step into the “robo-advisory” market. The company also formed a strategic alliance with Amazon AMZN to build a new solution that can store documents and data in a repository, which will be further used for machine learning and artificial intelligence.

Furthermore, Broadridge’s product launches, share repurchase programs and regular dividend payment policies look encouraging. We believe that the company’s close association with Accenture ACN will also be beneficial over the long term.

Zacks Rank and Key Pick

Broadridge has a Zacks Rank #2 (Buy).

Another top-ranked stock in the broader technology sector is Broadcom Limited AVGO, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Broadcom has a long-term expected EPS growth rate of 13.75%.

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