Opinions
David Baskin
Gluskin Sheff and Associates
GS-T
DON'T BUY
Nov 14, 2017
Stock price when the opinion was issued
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A cheap company, valuation wise. They often pay special dividends. There were some litigation issues with the cofounders, but that’s behind them now. There is a new CEO coming on who has taken on a 2% position in the company, and thinks he is going to do some things to help move the share price. Dividend yield of 6.4%. (Analysts’ price target is $17.)
A long-term manager of high net worth clients, who historically has done pretty well. He would avoid the stock right now. In the last year there has been a lot of infighting. The 2 founders are suing the company. Performance numbers have not been impressive. He worries what is going to happen to their asset flows, given some of the stuff that has happened.
(A Top Pick Feb 15/17. Down 5%.) A midsize asset manager, and manages about $9 billion. Although it has come off its peak of a year ago, the total return kind of dampens that, because it is quite a dividend payer. Periodically pays out special dividends. Dividend yield of about 6.5%.
Funds outflows usually follow underperformance. Once they start typically could go for years. The other factor that affected them is the departure of PMs. They could be a takeover target (like anything on the market). Most entities in the private wealth management space are private. He doesn’t think a takeover could happen soon.
All money managers are down this year 25-35%, worse in the U.S. Only Guardian Capital has held up. These are plays on the overall market, so as markets go down, assets leave the asset managers. So, the macro has hurt GS. Last quarter, $250 million in assets left GS out of a total of $8 billion. There are worries among asset managers that more assets will leave them as investors panic in this downturn. Cheap multiple.
Founded by 2 people who were geniuses in the business of managing money for high net worth families. The stock has struggled. The company makes its money by charging a fee on assets under management, but also by charging a participation fee on profits. Increasingly, high net worth families are resisting paying participation, simply because they don’t have to. Because of this, the company has difficulty in expanding its asset base and producing the kind of profits investors want to see.