Thursday, August 27, 2009

Power Financial Corp 2

I am continuing my review this stock (TSX-PWF) today as I have not yet reviewed it and the 2008 year end annual statement has came in. I also own this stock. I have had this stock since December of 2001 and I have earned 9% return per year on this stock, including dividends.

When I look at insider selling it all seems to be by one director, Robert Gratton and this occurred prior to April 2009. It looks like a lot at 85M in insider selling, but this is about ½ of 1% of the outstanding stock. So the bottom line is that what appears to be high net selling is not a problem that I can see.

I had updated my spreadsheet for the 2nd quarterly report of this company dated June 2009. For 2009, I have a P/E of 14 based on earnings estimates. Others have it lower. Mine is lower than the 5 year average. Others are lower than the 5 year low average of 12. The dividend yield 4.7% is higher than the 5 year average of 3.2%. The Price/Book Value ratio is only 60% of the 10 year average. The current stock price is about the Graham Price.

All the above items point to a relatively good current price. The Accrual Ratio is low, so this is not a problem. The only problem I see is the lack of good earnings growth, and this is expected to improve over the next couple of years. Unfortunately, the expected earnings for this year are not expected to be great, but it is expected to be better than for 2008.

In looking at the charts, this stock has done as well as the TSX Financial Index over the long term and better than the TSX over the long term. As this is a dividend paying stock, the dividends have added an extra 3% per year on to the returns of this stock. Over the short term, this stock has not done as well as either of these indexes, but it is close to them.

There are a number of analysts that follow this stock. However, their recommendations are spread over the 3 categories of from Strong Buy to Hold. So the mean recommendation would be a Buy. (See my site for information on analyst ratings.) Personally, I am current going to hold on to my shares as I feel this is one of my core holdings.

Controlling shareholder of Power Corp of Canada is Paul Demarais. They have 30.1%, but they have 64.6% voting control. This company is a holding and management company. Its operations provide a range of individual and corporate financial and fiduciary services in North America and Europe. Subsidiaries of Power Financial include Great-West Lifeco, IGM Financial, London Insurance Group, Canada Life Financial, Putnam Invest., LLC Investors Group, Mackenzie Financial Corporation, and its affiliate Pargesa Holding SA. The Pargesa Group holds significant positions in five large companies based in Europe of Total (energy), Suez (energy, water, and waste services), Imerys (specialty minerals), Lafarge (cement and building materials and Pernod Ricard (Wines and Spirits). Its web site is . See my spreadsheet at

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets.

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