# AGF Management (AGF.TO)



## jmarks (Feb 14, 2012)

Anyone have any comment's around this companies future?
Bought it a few years ago and am contemplating selling a large lose. Reason being I just can't see how they can survive this day and age selling only Mutal's. They send out a monthly update on the $$ of funds under their control and for the last few years it just steadily drops off. Yes they sold a chunk of their business a while back to generate some cash, but that will only last so long.

Am I being over reactive or do guys think this company has any chance of growing and if so how ?

Thanks


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## audio (Apr 19, 2013)

Given the way ETFs have taken off over the last few years, I'd say that mutual funds will eventually become a thing of the past, or at least stabilize at a much lower level than they're at today. I think you've already noticed that by studying the assets under management.


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## doctrine (Sep 30, 2011)

Their dividend, at 10%, is nearly twice their earnings. I'm surprised they are as far above their 52 week low of $8.28 that they are now at $10.87 today. I would take my money and run before the shares drop in half again. They have to double or more their earnings just to start covering their dividend - I'm not sure how that will be possible.


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## jmarks (Feb 14, 2012)

doctrine said:


> Their dividend, at 10%, is nearly twice their earnings. I'm surprised they are as far above their 52 week low of $8.28 that they are now at $10.87 today. I would take my money and run before the shares drop in half again. They have to double or more their earnings just to start covering their dividend - I'm not sure how that will be possible.


I don't think it quite as bad as that. 
2012 earnings per share where $0.92 a share and dividends $1.08. Also I believe they plan is to continue the dividend and pay the missing portion out of their cash on hand of which they have enough to pay the dividend for a number of years to come.
However that is still not sustainable even though they have committed to maintain them for this year. The biggest issue I have is the current model is not sustainable and they have not given any indication what they might/could change in order to become profitable again.


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## doctrine (Sep 30, 2011)

Last year's earnings included (for 6 mo) the discontinued, profitable operations that they sold to Laurentian Bank. I believe Q1's earnings of $0.17 a share are about the most you can expect going forward. Putting an optimistic P/E of 10 on that gives a price target of $6.80.


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## jmarks (Feb 14, 2012)

doctrine said:


> Last year's earnings included (for 6 mo) the discontinued, profitable operations that they sold to Laurentian Bank. I believe Q1's earnings of $0.17 a share are about the most you can expect going forward. Putting an optimistic P/E of 10 on that gives a price target of $6.80.


I understand your logic, however most analysts have a share target around $13. The share price is holding up fairly well, so I'm left wondering what the "smart" money see's in a Mutual Fund company that I don't? As mentioned the company has indicated they are going to maintain the dividend even though it's now at 10%


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## AltaRed (Jun 8, 2009)

AUM in the overall industry is down and the banks are now dominating the lesser sophisticated investing public with their asset management companies. Investor's Group may last for some time given their business model and 'presence' and it is hard to say what the multi-nationals will eventually do with their Cdn operations. The true stand alone Cdn independents are likely toast. IOW, I would cut one's losses and move on.


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## Squash500 (May 16, 2009)

It didn't help AGF stock any when its star emerging fund manager .... Patricia Perez- Coutts left AGF in May 2012. She ran about $5 Billion in institutional assets for AGF.


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## doctrine (Sep 30, 2011)

jmarks said:


> I understand your logic, however most analysts have a share target around $13. The share price is holding up fairly well, so I'm left wondering what the "smart" money see's in a Mutual Fund company that I don't? As mentioned the company has indicated they are going to maintain the dividend even though it's now at 10%


I've never seen much value in analyst estimates. They tend to be always 10-20% higher than the current share price for a majority (not all) stocks. When the stock does something "unexpected" (which is almost all the time), targets are adjusted upwards or downwards but almost always still 10-20% of the new price. This works well on the way up for a rising stock but makes them look really dumb on the way down. 

On the other hand, they are profitable, which is perhaps why institutions are sticking around. They're just not profitable enough to pay for the dividend. Maybe they'll sell the company. Who knows.


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## Jungle (Feb 17, 2010)

If someone does come in to buy, I hope it jumps the price up. 
I could sell this one later and do some tax loss harvesting.


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## AltaRed (Jun 8, 2009)

Except if management is in denial and it drops to $2 before they throw in the towel, it may only be worth $2.25 at that point. AKA... a potential slippery slope.


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## Jungle (Feb 17, 2010)

So hard to time stocks. But it comes down to holding quality companies. What I don't like is the selling of the agf trust, I assume that money is now cash and no longer making revenue?


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## AltaRed (Jun 8, 2009)

I see this as a buggy and whip type of business. I don't understand why people would hang around but that's me.


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## jmarks (Feb 14, 2012)

Actually I'm starting to see what the smart money is seeing, a growing United States Institutional customer base! If AGF can snag a few more 401k accounts they could grow quickly.
From the last Qtr. conference call it sounds like they have some deals in the pipeline, so maybe that's what's causing the pps to rise? 
As usual, time will tell.


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## Jungle (Feb 17, 2010)

Still holding, and yes it has kinda been creeping up. We are in a bull market the s&p500 is up 15% again. Not sure what effect this will have people jumping in the stock market, but thair aum is still dropping month over month?


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## GoldStone (Mar 6, 2011)

AFG has 38.8 billion in AUM as of March 31, 2013. A decrease of 8 billion YoY.
http://www.newswire.ca/en/story/1139341/agf-reports-march-2013-assets-under-management

Contrast this to WisdomTree, a small ETF shop. It attracted 5.9 billion in new AUM in Q1 2013, on the strength of one ETF (DXJ).
http://finance.yahoo.com/news/dxj-fuels-7-fold-jump-092424295.html

Nuff said.


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## My Own Advisor (Sep 24, 2012)

I wouldn't necessarily follow the advice of others, but based on the cash flow metrics, the story doesn't look good. 

The price chart doesn't look good, quite bad actually:


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## Jungle (Feb 17, 2010)

I will be selling some stock in Aug, this might be one. Then I can capture the capital loss and use it against capital gains for the future.


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## jmarks (Feb 14, 2012)

The chart is steadily improving and I believe it's likely due to a deal they have in the pipeline, nothing else makes sense to me. 
They wouldn't comment on the deal during the last conference call other than to say it's on the larger size. 

As people have pointed out the overall continuing business doesn't support the current pps. so something else must be driving the price on this one, but WHAT ? I only have access to iTrade investor reports which don't say a whole lot, the only thing I noted is that 80% of the company is owned by the deceased founder of the company. 


I'm down a lot on this one in my RSP, so I'm trying to figure out if I should sell or take my chances on management putting all that cash to good use. The dividend is awesome and safe according to management, but everyone knows you can't give out more than you take in for very long before the chickens come home to roust!

Come on my fellow investors, help me figure out what the whole story is on this one 

Goldstone, that's comparing apples to oranges totally different business models.


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## My Own Advisor (Sep 24, 2012)

@jmarks,

A 9% dividend yield is not sustainable.


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## GoldStone (Mar 6, 2011)

jmarks said:


> Goldstone, that's comparing apples to oranges totally different business models.


Totally different?? The basic premise is the same: extract fees from AUM.


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## jmarks (Feb 14, 2012)

GoldStone said:


> Totally different?? The basic premise is the same: extract fees from AUM.


Yes I believe you are correct on the basic premise.
However the application of the two are very different. For example most DC pensions and 401k's typically only use Mutal Funds and make employee's pic from a select set of funds. 
I think the Mutal Fund Companies have so much clout they ensure Mutual Funds are the main source for these situations. Can't say as I understand why these Pension funds use only Mutal's instead of ETF's? IMO it's politically motivated and thus gives the Mutal Fund Companies a leg up when it comes to Pensions. I see NO reason why they couldn't use ETF's and put more $$ in the pockets of the end purchaser. 
Having said that, the Mutal Fund Companies have this niche cornered at this time and that's the ONLY thing I see that is keeping these funds alive. They won't sell ETF's as they know they will loose the premium MER's they get on Mutal Funds! Why wouldn't these Mutal Fund companies move into ETF's when they know sales of Mutal's are dropping while ETF's are increasing?
As it relates to AGF their overall AUM has been dropping as a whole, but higher return Institutional purchases have been increasing at a pretty good clip. Why?? That's what I want to know!

What I'm hoping is that someone that really understands the industry can shed some color on the subject.


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## GoldStone (Mar 6, 2011)

jmarks said:


> For example most DC pensions and 401k's typically only use Mutal Funds and make employee's pic from a select set of funds.
> I think the Mutal Fund Companies have so much clout they ensure Mutual Funds are the main source for these situations. Can't say as I understand why these Pension funds use only Mutal's instead of ETF's?


I have DC plan at work. My wife has group RRSP. Both plans are 100% indexed. There are no active funds on the menu. My plan is at SunLife. Her plan is at ManuLife. In both cases, BlackRock manages the underlying index funds. 

Both of us work for US multinationals. It's a safe bet they use similar setups in their US plans.

The threat to AGF is not ETFs. The threat is the movement away from expensive active management to inexpensive indexing. BlackRock has $4 Trillion dollars in assets under management.


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## jmarks (Feb 14, 2012)

GoldStone said:


> I have DC plan at work. My wife has group RRSP. Both plans are 100% indexed. There are no active funds on the menu. My plan is at SunLife. Her plan is at ManuLife. In both cases, BlackRock manages the underlying index funds.
> 
> Both of us work for US multinationals. It's a safe bet they use similar setups in their US plans.
> 
> The threat to AGF is not ETFs. The threat is the movement away from expensive active management to inexpensive indexing. BlackRock has $4 Trillion dollars in assets under management.


Interesting, and thank you for your input!

I've got family in the U.S. and anyone that is in a DC plan has a 401k can only choose from Mutuals. The company I work for in Canada went to a DC and the only vehicle our people can invest in are a handful of Sun-life sponsored mutuals. 
I find it intriguing that Sun-life would sell someone else's product, but I guess as long as they get their admin. fee then they are happy. I wonder why our people can only purchase Sun-Life mutuals? And it begs the question of whether our U.S. subsidiary is limited to Mutuals or if they can buy ETF's as well? I stayed in the DB plan so it's not important to me, but I hear a lot of unhappy people talking about the crappy and expensive Mutual funds they are limited to.

From what I've seen even actively managed ETF's are still a lot cheaper than mutual's.


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## Jungle (Feb 17, 2010)

Stock is up a lot considering poor earnings and aum...could there be a buy out looming?


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## doctrine (Sep 30, 2011)

$0.17 in the last quarter, div payout ratio of 160%, and AUM down nearly 10% when most markets are up 5-15% year over year.


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## Jungle (Feb 17, 2010)

stock is up 27% ytd not including div.. i'm still holding since 2010..not sure what to do. the stock market doesn't make sense sometimes.


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