CI Financial Corp (CIX-T)

Building US business dramatically, planning to take public sometime in the future. Canadian side is well run, but the mutual funds business hasn't grown in years, perhaps 10% a year. Big dividend. Combining both sides of the business should garner a $35 stock price easily, $50 if they really tried. Yield is 4.6%.

There have been management changes and it pushed too hard into the U.S. It has a good dividend yield of 5.4% and is buying back stock

Aggressive acquisition hunt for the last decade. Tough to be an independent in Canada, as Canadian banks control so much of net worth. He'd rather own the banks with their broader diversification. Warren Buffet says "A lousy industry will beat great management every time."

A massively levered company, though the business does well and gushes cash glow. But they spend a lot of money to buy asset manager businesses. That has not panned out.

It took on lots of debt at low interest rates which has given it some balance sheet trouble. It has sold some holdings. There isn't growth but debt is OK now. It is exceptionally cheap at 3.9X 2024 earnings. Pays a dividend of 5.6%. He bought some last week.

It used to be a great stock and the earnings ratio of 20X has dropped to 5X. It pays a 5% dividend and is buying back stock. The IPO of the U.S. business part is possible. It sold off part of its business to private equity via preferred shares which have a 14% guaranteed annual minimum return.. This could cause losses to common shareholders. He would prefer IGM.

Company selling off USA business rewarded by market.
Strong fundamentals. 
Likes long term prospects for company. 
Good time to buy shares.

Last quarter was in line, solid improvement in net flows. Fabulous job building out asset management platform. Moved down sharply with the group. Nice dividend of 6%, safe. Ridiculously cheap at 4.8x 2024 estimated earnings. 

Doesn't love the business. Sometimes names get too cheap not to buy. Beta play on improving markets. Not a 10-year hold.

Diversified away from core mutual fund base, which has no growth. Started piling on debt to buy Registered Investment Advisors in the US, which they haven't been able to roll out. Timing was bad. Insiders continue to buy aggressively. Cheap valuation. 

As a general rule, the financials will be a net beneficiary of inflation. It's been dropping--and its drops during its divestiture, so this is worth looking at now.

CIX’s fundamental metrics – its Asset under Management (AUM) has been quite resilient amid a challenging macro environment, with growth mainly coming from US wealth management, which management indicates is the key growth lever for the company in the future. In addition, the company has a track record of repurchasing shares aggressively in recent years, which indicates management believes shares are undervalued.

Like other names in the Financial sector, CIX has been under pressure recently due to the fear of contagion risks in the financial systems, as well as weak capital markets. Although there is a contagious sentiment risk, we think this risk is low in probability as the Fed and other countries’ central banks publicly announced their intention to stabilize the Financial system. CIXs is not impacted by deposits, but margins are trending down and business remains competitive. But the stock is priced right, and it has managed a challenging environment well enough and made good acquisitions over time. Overall, we think CIX is a hold.
Unlock Premium - Try 5i Free