Friday, September 14, 2012

IGM Financial Inc 2

I do not own this stock (TSX-IGM), but I used to. I held this stock from 2006 to 2011. I made 3.1% per year. Of this total return, 4.2% came from dividends. I had a capital loss of 1.1% per year. I sold because I wanted to rationalize my portfolio. This company is part of Power Financial (TSX-PWF), which I also hold. I sold what I had in this company to buy more Power Financial.

The insider trading report shows a tiny bit of insider buying and no insider selling. This company not only has options, but Senior Executive Share Units, Executive Performance Share Units, and Deferred Share Units. Most insiders have lots more options and options like things than shares. For example, the Co-CEO's have options worth $18.8M and $14.4M, and shares worth $1.1M and $8.6M.

The company has been buying back shares for cancellation. They seem to be buying back slightly more shares than were issued for options. So shares outstanding have been treading down wards slightly at a rate of less than 1% per year. Paul Desmarais owns approximately 62% of the outstanding shares.

There are 181 institutions that own around 16% of the outstanding shares. Over the past 3 months they have bought and sold shares. They have slightly increased their shares, but there were 3 more sellers than there were buyers.

The 5 year low, median and high median Price/Earnings Ratios are 11.87, 14.80 and 17.01. The current P/E Ratio is 13.51 on 2012 earnings estimate of $2.89 and stock price of $39.03. This would suggest that the current stock price is relatively reasonable.

I get a current Graham Price of $33.27. The 10 year low, median and high median Price/Graham Price Ratios are 1.20, 1.37 and 1.62. The current P/GP Ratio is 1.17 and this would suggest that the current stock price is relatively good.

I get a 10 year Price/Book Value Ratio of 2.86 and the current P/B Ratio is 2.29. The current is 80% of the 10 year median ratio and this suggests that the current stock price of $39.03 is a relatively good one.

The 5 year median dividend yield is 5.02% and the current dividend yield is 9.8% higher at 5.51%. This suggests that the current stock price is relatively good. Note that the dividend yield has been treading up lately and the 10 year median dividend yield is quite a bit lower at 3.52%.

When I look at the analysts' recommendations, I find Buy, Hold and Underperform. The consensus recommendation is a Hold. The 12 month consensus stock price is $41.20. This implies a 13.28% total return over the next 12 months with 5.51% from dividends and 7.77% from capital gains.

No one thinks that the earnings for 2012 will be as high as those for 2011. The first two quarters seem to bear this out. Earnings for the first two quarters of 2012 are down by 12.5% from the first two quarters of 2011. However, 2011 was a very good year. What is expected in 2012 is higher than earnings in 2010 by 4.7%. Not a big increase, but an increase none the less. Also, 2009 was the low year for earnings and what is expected in 2012 is some 36% above 2009 earnings.

One analyst said that he preferred Power Corp (TSX-POW) or Power Financial (TSX-PWF) as a way to gain exposure to IGM. Both these companies have P/E's of around 10 compared to IGM's P/E of 13.51. Some analysts do not like to mutual fund industry in Canada. They feel that the fees are too high and people are becoming aware of this.

One analyst thought the company was being beaten up because it is in the mutual fund business, but thought the company was rock solid and safe. IGM has just reduced their fees. See Globe and Mail article.

The Loonie Bin Blog has an interesting post on this company. See his site. He has some good reasons for preferring this stock to Power Financial (TSX-PWF). Also, the Jags Report site talks about recent changes to analysts' recommendations for this company.

I still think that this is a great company. I just did not want to hold both Power Financial and this company in my portfolio and I decided to go with Power Financial, which I have had for a longer period of time. There are pros and cons for both these companies and I think that they are both good investments.

This is a premier mutual fund, managed asset and personal financial services company. The company has three operating units, Investors Group, Mackenzie Financial Corporation and Investment Planning Counsel Inc. IGM Financial Inc. is a member of the Power Financial Corporation group of companies. Its web site is here IGM Financial. See my spreadsheet at igm.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 for stocks followed and investment notes. Follow me on twitter.

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