Wednesday, October 28, 2009

CI Financial 2

I am continuing my review this stock (TSX-CIX) today as I have updated my spreadsheet with the December 2008 financials and the 2nd quarterly financials. I do not own this stock. This company has lost it listing on the dividend lists I follow because of the cut in dividends.

One of the things I always look at in the second part of my report is the Insider Buying and Insider Selling reporting. On this stock, it is a bit troubling as there is quite a bit of insider selling by CEO, CFO and other officers. Most of this insider selling was done a while ago (i.e. back in June of this year), but the amount of it, together with the fact there was no buying makes me think that all is not well.

I know that a lot of people do not like stocks that cut their dividend. If you own such a stock, you got to decide if you should sell, continue to hold or buy more. For example, when Manulife cut their dividends this year I decided to continue to hold what I had. When TransCanada cut their dividend in 2000, I decided that it was time to buy. With this stock, it would seem the dividend cut has had little effect. When you look at this stock on the charts compared to the TSX over the past couple of years, it has basically followed the same pattern as the TSX. That is, the dividend cut did not seem to discourage people from pushing up the stock price from the March 2009 lows.

When I look at the P/E ratio, I get 23 for 2009 and 17.8 for 2010. Sites that do the P/E on earnings to date (and not earnings estimates) get a current P/E around 19. Generally speaking, a P/E of 10 says the stock is a good buy. A P/E of 19 is a bit rich; however, this stock has had a tendency towards a rather high P/E. When I look at the Price/Cash Flow ratio, I find the current one to be 13 where the 10 year average is just above 13. The problem with both these ratio is that they are based on estimates for 2009.

In looking at yield, I get one of 2.5% for 2009. The 5 year average is over 5%, but this is because of very high yields in 2007 and 2008. A yield of 2.5% is probably not a bad yield for this stock. The one ratio that says the stock is at a good price is the Price/Book Value ratio. When the current ratio is less than 80% of the 10 year average, this is a good buy signal. The current Price/Book Value ratio is only some 45% of the 10 year average. Note that these ratios are not based on estimates, but on current dividends, book value and stock price.

The last value to look at is the Graham price. The Graham Price at the end of 2008 was $14.00. Currently it is $10.21. It decreased mainly because of the current earnings estimates. The stock price of $19.39 is some 90% higher than the Graham price. However, if you look at the average difference between the stock price and the Graham Price you get a value of over 200%. So, on a relative basis, the stock price is closer than normal to the Graham Price. On an absolute basis, the stock price is way above the Graham Price.

When I look at analyst’s recommendations, I find the vast majority to be a Hold. However, I did find one Strong Buy. However, because of the number of Hold recommendations, this stock comes with a consensus of a Hold. (See my site for information on analyst ratings.) It is interesting that the consensus recommendation I found in February 2009 was also a Hold. However, this was because there was lots of Hold ratings and one reduce or underperform rating. If you look at the chart on this stock, it would appear that this recommendation was widely ignored as this stock climb in value from the March 2009 lows in the same manner as the TSX index.

The other negative to mention is that the earnings estimates I got for this stock now are lower, compared to the ones I got in May 2009. This is often a negative sign. The real thing to note is that the TSX is again lower today, with high volumes. This points that perhaps the fall stock market decline is on and we might be able to pick up stocks at good prices in the near future. There are also sorts of mixed signals on the price of this stock, but this may change if we have a good stock market decline this fall.

CI Financial Corp. is a diversified wealth management firm and one of Canada’s largest investment fund companies. CI is an Independent and Canadian-owned company. This company promotes and manages mutual funds and other investment products through its wholly-owned subsidiaries of CI Investments Inc., United Financial Corporation, Assante Wealth Management, KBSH Capital Management, and Stonegate. CI became a public company in June 1994. It was then listed on the Toronto Stock Exchange. They because an Income Trust in 2006 and effective January 1, 2009, CI converted back to a corporation. 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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