CI Financial Corp (CIX.TO)

*Short* (Top Pick Nov 9/16, Up 13.10%) He has been short. He is just leaving it on. The stock is up a reasonable amount but an insider is selling. It is a very expensive stock in a dying industry. They are seeing net outflows.

*Short*, stay short. The industry is in secular decline. (Analysts’ Target: $28.83).

There are always take over rumours on this. It is the biggest independent fund company out there. He sees that as being less likely these days as most Canadian banks have their fund presence already. This is one of the more efficient operators, concerning expenses and paying good dividends, so it is a good place to be. However, they are facing challenges with regulations on fees.

*Short* He recently added to his short position. It was the first real pop in the stock since he started shorting it. The earnings were particularly bad and the firm sees net outflows from their funds. CRM2 is forcing brokers to disclose what they are paid by mutual fund companies. He thinks it is a secular bear story. There is somewhat of a risk that they get bought out.

*Short* (Top Pick Sept 15/16, Up 2.14%) He is keeping it on as he sees it going into the teens. There is enormous competitive and regulatory pressure.

His opinion on mutual funds in general is to Hold for now and maybe Buy later on. The mutual fund industry is about to go through a big problem with CRM2, where clients are about to find out the egregious amount they pay in MER’s to own the funds. That could cause some disruption for the industry. Dividend yield of 5.5%.

Just reported a significant outflow over the last quarter, about $1.5 billion of assets, and are projecting more to come in the next quarter. It’s primarily institutional assets, so it’s pretty low margin business. All these companies are under pressure and prices are being pushed down, so margins are likely to come down. The only way they can deal with that is through cost control. He is a little cautious about the whole industry.

Have had some weak mandates over the last 12-18 months, and some sizable institutional outflows. There are a lot of mutual fund headwinds, but thinks these are more than captured in the valuations. Trading around 13X versus its 18X five-year average. His analysts model 80% growth in 2017 over 2016. There is $1 billion of institutional commitment that could come on over the next two quarters. They have a buy back which helps them. Good 5.5% very well covered dividend yield. Cheap enough that you could write a Put and get paid premiums. This is good here for a nice little trade.

*Short* The new disclosure requirements about fees will crimp sales especially at companies where sales are weak like this one. It is still a very expensive stock.

*Short* (Top Pick July 5/16, Up 4.74%) They have been seeing redemptions over the past year. He is still short this stock. The valuation is still very expensive. It is a very tough business with the regulatory environment changing in Canada. Broadly, it is a very well managed company, however.

Well run / well managed. There were concerns of loss of institutional mandates and the strength of their sales. They have healthy profit margins. Management is good.

This has a fairly attractive dividend, so some people tend to own it for that reason. It is in the mutual fund business, and he worries that there are a lot of long-term pressures on that industry. Not a particularly cheap stock and has an OK dividend.

(Market Call Minute) All mutual fund companies will get hit by the upcoming discloser of fees. Funds should move to ETFs.

*Short* This fits in with the broader theme of being Short financials. Trades at an excessive valuation, 7% of its assets under management. Its peer group in the US would be 2%. Canadian regulatory environment is changing to the extent that investors will now actually see the mutual fund fees they pay in dollar terms. That is going to bring about more conversations about performance, and this company’s performance has lagged the peer group.

It meets his criteria, however the mutual fund space has been played out. He thinks they are struggling with fund outflows. He feels there are better opportunities.