Gluskin Sheff + Associates Inc 2

I do not own this stock Gluskin Sheff + Associates Inc. (TSX-GS, OTC-GLUSF). I started to review some of the stock recommended by Jennifer Dowty from a column she wrote and I reviewed in February 2010 on Dividends and Special Dividends. The title of the article in Investor's Digest was Dividend Stocks: Buy, Hold and Collect. Jennifer is now a Portfolio Manager for Manulife Asset Management Limited.

When I look at insider trading I find some $0.4M of insider buy and no insider selling. There was a couple of recent insider buys totaling almost $250,000 at just under $20.00. This is a significant positive sign of faith in the company. There is also significant insider ownership with one officer has shares worth around $26M and another has shares worth around $14M. However, Gluskin and Sheff have just sold off their shares and now have around 1% of the outstanding shares each which is around $5M of shares.

The 5 year low, median and high median Price/Earnings per Share Ratios are 9.47, 13.08 and 17.58. The current P/E Ratio is 12.03 based on a stock price of $19.00 and 2013 earnings of $1.58. This stock test says that the stock price is relatively reasonable.

I get a Graham Price of $10.19. The 10 year low, median and high Price/Graham Price Ratio is 1.49, 2.07 and 2.84. The current P/GP Ratios is 1.86 based on a stock price of $19.00. On a relative basis, this stock test says that the stock price is reasonable. However, please note that the P/GP is rather high.

The 10 year Price/Book Value per Share ratio is 7.50. The current P/B Ratio at 6.50 is some 86% of the 10 year ratio and this stock price says that the stock price is relatively reasonable. However, here again the P/B Ratio is rather high.

The current dividend yield on a stock price of $19.00 is 4.21%. The 5 year median dividend yield is some 13% lower at 3.73%. This stock price says that the stock price is relatively good to reasonable.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. Most of the recommendations are a Hold and the consensus recommendation would be a Hold. The consensus 12 month stock price is $22.70 and this implies a total return of 23.68% with 19.47% from capital gains and 4.21% from dividends.

For information on the sell off by Gluskin and Sheff and share structure change to get rid of multiple voting shares, see a Wall Street Journal article. Jonathan Ratner of Financial Post thinks these changes are positive. There was also a September press release earlier from the firm to say that Ira Gluskin and Gerald Sheff are selling most of their shares to a syndicate of underwriters and that the dual share structure will be changed and all multiple voting shares will be converted to subordinate voting shares on a one for one basis. The selloff occurred at $19.00 a share. This seems to be the only news on this stock.

On a relative basis the stock price of $19 seems to be a reasonable one. This is the same price as was paid to Gluskin and Sheff recently. The P/E Ratios are reasonable and the dividend yield is good. However, the P/GP Ratio is rather high as is the P/B Ratios. See my spreadsheet at gs.htm.

This is the second of two parts. The first part was posted on Monday, October 21, 2013 and is available here.

Gluskin Sheff is an independent investment firm that manages portfolios for high net-worth individuals and institutional clients. Its web site is here Gluskin Sheff.

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 or StockTwits.