Stockchase Opinions

Stephen Takacsy, B. Eng, MBA Guardian Capital Group GCG.A-T PAST TOP PICK Aug 26, 2015

(A Top Pick Aug 21/14. Down 5.45%.) With the markets behaving the way they are, a company like this is somewhat correlated, because they do manage assets. Have been executing beautifully. They are up in terms of assets under management and their EBITDA year-over-year by double digits. Made some good accretive acquisitions. Buying back stock very aggressively. On valuation, he attributes about $9.00 to the money management business and $13 to their portfolio, which are mainly BMO (BMO-T) shares. They are focusing on growth. At this price it is a great buy.

$17.000

Stock price when the opinion was issued

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COMMENT

He is Long this stock and Short the Bank of Montréal (BMO-T). In 2001, Guardian sold its mutual fund business to BMO in exchange for 5 million BMO shares. It has been sitting on those for the last 14 years. He put this trade on in 2009 when Guardian was trading at a 25% discount to its value in the BMO shares, so historically it was trading at about a 25% premium. Regardless of what the market conditions did, he saw a 50% upside if it returned to normal levels of trading, relative to the BMO holdings. Essentially he has a 3.5% position in this with a 3%-3.5% Short position with BMO, so it is relatively market neutral. The Guardian is less liquid than the BMO, so if he decides he wants to vary his not market exposure, it is a lot easier to trade BMO. He will vary this trade to a variety of conditions.

PAST TOP PICK

(A Top Pick Feb 10/15. Up 2.22%.) *A Long Paired with BMO Short*. The reason for this trade was that Guardian has sold its mutual fund business to BMO in exchange for $5 million of BMO shares.

TOP PICK

A deep value company, where it is an asset manager. Market cap of about $650 million-$675 million. They own Bank of Montréal (BMO-T) shares that are worth about $360 million, as well as other securities that are worth about $230 million. You are almost getting the asset management company for free. Extremely cheap. They continue to buy back shares. Dividend yield of 1.58%.

TOP PICK

*Long* (Pairs trade with a Short on BMO-T). In 2001, they sold their mutual fund business to BMO in exchange for 5 million BMO shares. They sat on the 5 million for a while, but have started selling them and are down to 4.2 million. However, if you take the value of their BMO shares plus some of their other investments, it comes to $17.96 a share, and is trading at roughly $22.50, so there is not very much value in that stub. Because of this, you can pay a very healthy premium for the current share price if somebody came in. There really is a scarcity value of independent asset managers in Canada, so he expects that one day, if not BMO, that someone else will come in and take this company out.

TOP PICK

Half the market cap is BMO-T shares. It is a cheap way of playing BMO-T and you get their money management business at a big discount.

PAST TOP PICK
(A Top Pick Jan 29/18, Down 13%) It has held up well considering asset managers are hitting 52 week lows. It is worth about $34 so trades at a 33% discount. There is no debt. They buy back shares on a regular basis. Buy it on the dips.
TOP PICK
You get the asset manager for free, because of the underlying value in all the BMO shares they own. They own $600 million in total assets, plus $200 million in the asset manager who have generated good growth. One fundamental global fund has shot up from $1-billion to $3-billion in assets. They hold alot of Canadian assets, which may come back into favour and drive up GCG's fees. Good momentum. (Analysts’ price target is $32.50)
TOP PICK
Fastest-growing investment manager over the last decade. Growing organically and by acquisition. Trades at a 40-50% discount to its intrinsic value. Regularly increases dividend. Yield is 2.36%. (Analysts’ price target is $40.00)
TOP PICK
Fastest-growing asset manager in Canada, organically and by acquisition. Also sells life insurance. Trades at 40-50% discount to intrinsic value. Shareholder friendly. Big dividend increases. Very well managed, high quality. Excellent growth potential. Yield is 3.25%. (Analysts’ price target is $43.67)
PAST TOP PICK
(A Top Pick Jul 14/22, Up 43%)

Sold off one division for lots of money. Significantly undervalued, worth $60. One of the big banks could come calling. Amazing management. Share buybacks. Huge, regular dividend increases.