Tuesday, October 27, 2009

CI Financial

I am reviewing 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 for this year.

When I look at the growth figures to the end of 2008, they are all great. However, these growth figures will come down for all the items I follow. For example, the growth figures for dividends will come significantly down in 2009 because of the recent dividend cut. The growth figures for dividends to the end of 2008 were 42% per year and 75% per year for the 5 and 10 year period. If they pay the dividends that are currently expected, these figures will be 8.5% per year and 65% per year for the 5 and 10 year period.

Even the book value is currently slightly below that at the end of 2008. This company will not produce good figures for 2009 and possibly 2010. However, it suffered problems also in the last bear market and recovered nicely. The company is in the mutual fund business and this business does not do well in bear markets. Not only the value of the funds they have under management decline with the bear market, a lot of investors get scared and cash in their investments.

Turning to the liquidity ratios, I find this ratio has always been quite low. That is, it is usually be 1.00. The liquidity for this stock has improved for the 2nd quarter of 2009 and now stands at 0.93. At the end of 2008, it was 0.87. The 5 and 10 year averages for the liquidity ratio is only 0.90 and 0.96. The Asset/Liability ratio is much better at 1.80. This has not moved since the end of 2008.

The Return on Equity or ROE for this stock is generally very good. The 5 year average is over 24%. The ROE will come in this year probably far below this average and currently stands at just under 14%. The good thing that I see is that the current accrual ratio is almost -5%.

This stock can earn its investors money over the long term. The returns also have a high dividend portion. It is often said that investors can make more money investing a Mutual Fund company than investing in Mutual Funds. The main problem, as I see it is that this sort of company will be hit hard by a bear market. So if you invest in one, you have to be prepared for this. Tomorrow I will look at what the analysts are saying.

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 www.ci.com. See my spreadsheet at www.spbrunner.com/stocks/cix.htm.

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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets.

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