Challenger Ltd (ASX: CGF) shares currently for $ 7.46 per share after falling 21% since the start of the year.
So what caused the Challenger stock price to tumble in 2019 and is it time to buy Challenger shares on the cheap?
Why the Challenger share price has fallen in 2019
The Challenger stock price had a soft ending in 2018, mainly due to significant losses on the investment portfolio as world market volatility hurt the asset manager's return on 2H 2018.  The bad news continued for shareholders in January this year when Challenger announced a mid-January earnings forecast, slashing its pre-tax profit guidance to between $ 545 million and $ 565 million, compared to $ 547.3 million booked in FY18.
While this may not look so bad on the surface, it followed Challenger's positive outlook in November 2018, which predicted profit growth before tax 8% to 12%, and investors set the rate for the exit.
This was reinforced by the Challenger announcing a 97% fall in its first half net profit after tax for 1H 2019, and it is easy to see why the Challenger share price has so far this year.
What is the outlook for 2020?
Fast forward to August, and the Challenger share price rose 10% on a day when the Aussie annuity provider reported a 1% increase in assets under management to $ 81.8. billion and a net profit of $ 308 million.
On a positive note, Challenger still has a strong balance despite its return on investment over the last 12 to 18 months, but I am not sure that the Challenger share price has reached its turning point yet.
Whil The obvious upside to the Challenger is the potential growth of the Aussie superannuation system and the trillions of dollars of assets offered, there are potential headwinds as well.
Challenger & # 39; s annuity business is dominant in the sector, but may soon face increased competition and subsequent margin compression, further lowering investment returns.
Another challenge I see is that the low interest rate environment in 2019 and 2020 also does not contribute to interest rate sales, with investors looking for higher returns.
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Motley Fool contributor Kenneth Hall has no position in any of the shares listed. Motley Fool Australia owns shares in and has recommended Challenger Limited. We Fools may not all have the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains only general investment advice (under AFSL 400691). Authorized by Scott Phillips.