AGF Management (B) (AGF.B.TO)

*SHORT* With the new disclosure rules coming into play on July 15, it is really going to hurt the mutual fund companies. There has been pressure on mutual fund fees and that is going to accelerate once the disclosure rules come into play. Also, ETF’s are going to continue taking market share away from mutual fund companies. Dividend yield of 6.25%.

This is a no go. It is in structural decline. Fees are far too high considering the competition. Turnarounds seldom turn. It is not an investment he is comfortable with. No analysts have a buy recommendation.

Doesn’t like dual class shares. Anyone who is in the mutual fund business has a real problem with ETF’s. You can basically duplicate diversification in a portfolio, pick your spots, and decide you will run with that. This wasn’t really available when mutual funds became popular. He would use ETF’s instead.

Chart looks like a ski slope. They are going down because they are losing market share, mainly to ETF’s. Currently this is in a bit of a consolidation phase. Financials generally do well from January 23 into mid April.

This is a classic value trap. A lot of the asset managers are doing very, very poorly. You just don’t want to get caught up in this, because assets can continually decline. ETF’s are attracting so many assets now. There is a lot of fat in the organization. He would choose CI Financial (CIX-T) instead.

You shouldn’t be buying this. Has a big dividend yield and trading at 10X earnings. They face a lot of issues including dual share structure. Have also had a declining revenue base over the last little while. They are suffering from poor performance with high cost funds in a world where investment advisors will have to list how much they make on each fund through MERs.

They cut their dividend once. It is safe now. They continue to suffer redemptions. He would prefer a bank with a mutual fund business than to own a mutual fund company. They have grown big enough that they can suffer through. New regulations will make it a very challenging business.

They have not been the leader in their field. They are in a down trend since the end of 2013. It does not seem like there is anywhere to stop.

They rely on third party advisors. It means your performance has to be very good, which it has not been in recent years. Rev Can is doing a review of some of their tax filings and this should weigh on the stock price for a while.

Can this return to a $12 stock? It is going to be tough. They had a big war chest after they sold off their trust division, and spent all that money on stock buybacks at significantly higher prices than the current price. They continue to pay out a dividend which is not really sustainable. The performance of the mutual funds has been challenged and investors are moving away from them. This is an area that you don’t need to be exposed to.

Looking at all the asset managers, this is the one that he is least optimistic about their prospects. These have come under a lot of scrutiny and pressure. In order to improve performance, the company has taken on additional expenses, so you are seeing the revenue decline and expenses go up. It is very likely that their AEM continues to shrink.

(Top Pick May 5/14, Down 41.47%) He felt it would be turned around, but in the spring he realized the loss of assets under management had caused a cut in the dividend and so he got out.

Money management, overall, is a growth business, but not so much for this company. They have had terrible performance. They’ve lost assets and money managers. This is a nepotism company.

(Top Pick May 5/14, Down 34.25%) He got out. He had thought they could turn the AGF assets around. There are fairly large gross outflows from the mutual funds. They had to cut the dividend. It’s dead money for now.

He tends not to like investing in companies where there is one family that is in control, because sometimes all the right business decisions don’t get made. This is a company that has struggled over the last few years, even more than other independent fund companies. Prefers CI Financial (CIX-T).