AGF Management wins 3-way race with Guardian and Fiera Capital

   Back in October 2019 my blog on Wordpress (Blogdaleup) compared AGF Management to Fiera Capital and Guardian Capital.As it is not logical to compare any of these junior financials to senior,mature capital companies such as Royal Bank or even Laurentian Bank.For example, Laurentian Bank has a market capitalization of $1.8 billion compared to $520 million for AGF.And there are economies of scale available to the larger company that are not open to the juniors.So the exercise was to predict which of the three financials would perform better over the next 2 years.Although 2 years has not yet passed this is a good time to see how all 3 junior financials are doing.

      Guardian Capital

  Guardian Capital(GCG) is in the middle of the three with a market capitalization of about $625 million.About $350 million of this value comes from a tranche of BMO shares that it holds which requires only passive management.At the time of writing the former blog GCG traded at $24 a share with a P/E ratio of about 17 times earnings.However over the past two years it has been relatively active with two fairly moderately sized acquisitions.Last year it bought a 70% share of U.S. $7 billion assets of mutual funds.And just recently it acquired $5.5 billion of assets from BNY Mellon.So now it has about $46 billion in assets under management (AUM)and trades at $29.50.So Guardian Capital has made moves to become an active asset manager but does not totally manage either of the new funds.As the former wealth management team will remain as managers.                      

     Fiera Capital

 Fiera Capital is the largest of the three funds with a market capitalization of about $846 million but it's share price has not fared so  well since October,2019. Shares traded at $10 at that time and although it has had periods when it traded at $12 now it is only at $10.25.However it's AUM is the largest of the three at $178 billion.In addition, it is investor-friendly with a quarterly dividend of $.21 for a 8% yield.It has been quite active in both buying and selling it's assets.

    It has acquired a number of funds since 2019 and usually has done so with little cash and mostly using it's shares.This has diluted earnings and increased outstanding shares to it's present 81 million shares.It's latest acquisition is the Australia-NewZealand fund called Global Equities with $500 million of AUM.Recently FSZ management has tried to correct this situation by buying back 11 million shares in 2020.In addition, it sold back Fiera Capital Emerging Markets fund and BelAir fund in 2020 to their partners in the fund.Fiera Capital often has partners managing their funds.

        It's Q4 report showed an increase in revenues from $171 million in Q3 of 2020 to $196 million.And revenues of $695 million versus $657 million in 2019.While adjusted EBITDA was$61 million for Q4 and $210 million for 2020.However it reported a net loss of $.7 million for Q4 and earnings of $2 million for 2020.        

     AGF Management

   

       AGF had a record $1 billion of sales in the first quarter;this was a considerable improvement over Q1 in 2019 which experienced a substantial amount of redemptions.And total AUM was at $41 billion for the first time above $40 billion.AGF grows slower than the other two funds as it manages all of it's own funds.However it does have a partnership with SAF Group.And it received a $ 6 million gain from the sale of it's British subsidiary Smith and Williamson in 2020.

     AGF does not buy other funds and manage them.It starts it's own homegrown funds and grows them organically.However it's adjusted EBITDA fell from $30 million in 2020 to $27 million.It also provides a quarterly dividend of $.08 for a 4.5% annual yield. AGF is fairly conservatively managed so carries a small P/E ratio of 3.5 and has quite reasonable fees.In addition, AGF has brought in some new senior management and top sales staff.

    Summary

 These are quite different funds.But this blog picks AGF as the winner in this 3 way race  in performance over the last two years.Guardian Capital is a quite stable stock with it's $350 million of BMO shares and substantial dividend earnings.And it has added to it's AUM with two recent acquisitions.Plus it's debt/equity ratio is still quite reasonable.But it's P/E ratio is fairly lofty at 19 times;this compares to a 13.9 P/E for BMO itself.Guardian must find a way to sell a small chunk of it's BMO shares ($25-$50 million) in order to buy an investment with a greater return on equity. Or else take on more debt.This would still leave GCG with more than $300 million of BMO shares as an anchor but possibly more growth prospects.That aside,this blog recognizes that Guardian has made improvements and has a more active management style.

    Fiera Capital has the largest AUM($178 billion) as it has made more acquisitions than the other two combined.But it has done so by doing share purchases and so has diluted earnings.In fact, FSZ shows (.03) e.p.s. in 2020.Fiera management has taken steps to buyback shares and so bolster earnings.It is possible that Fiera could increase it's stake in a number of these partnerships and so earn more control.However this blog does not expect positive earnings per share in 2021.But this blog realizes that Fiera is on the road to positive earnings.

    AGF has increased it's sales staff and made a record $1 billion in sales in the last quarter. Surveys show that Canadian savings are high now and some undoubtedly will go to mutual funds.So this blog expects sales to continue at the Q4 level or increase further.And AGF's P/E ratio is a paltry 3.4 times.That means that AGF is a quite cheap way to buy earnings and growth.However this blog would like to see new AGF funds that give more choice and risk such as AGF Emerging Markets,AGF Nasdaq funds and AGF Bitcoin funds.This could push AGF towards $9.00 by the end of summer.          https://www.fool.com/ https://www.guardiancapital.com/