Which Is the Better Buy: Fiera Capital Corp. vs. CI Financial Corp.?

Publicly traded independent asset managers such as Fiera Capital Corp. (TSX:FSZ) and CI Financial Corp. (TSX:CIX) are rare breeds. Both are good, but only one can be the better buy.

| More on:
The Motley Fool

Fiera Capital Corp. (TSX:FSZ) is Canada’s third-largest independent asset manager; CI Financial Corp. (TSX:CIX) is Canada’s second-largest independent asset manager.

Both are good stocks, but if you can only buy one of them, by the end of this article, you’ll know which one I believe is the better buy.

Reasons to own Fiera Capital

Talk about an asset manager in growth mode. Over the past five years, Fiera’s assets under management have grown from $58 billion in 2012 to $117 billion at the end of 2016.

That growth in assets under management (AUM) has led to healthy increases in revenue and adjusted earnings over the same period. In 2012, Fiera had revenue and adjusted net earnings of $115.3 million and $19.1 million, respectively. In 2016, it had revenue and adjusted net earnings of $344.1 million and $95.2 million, respectively.

Over the past four years, it’s grown revenues on a compounded annual basis by 31.4%; over the same period, it’s increased adjusted net earnings at 49.4% compounded annually.

Fiera’s growth in AUM, revenue, and adjusted net earnings over the past four years explains why its stock has averaged an annual return of 25% over that period.

Up 20.4% year to date, Fiera continues to build a business that’s more diversified by client, region, and asset class.

For example, in 2012, institutional markets accounted for 54% of its AUM. Today, that’s down to 42.6% with most of the difference redirected to the retail markets, where it continues to make inroads.

Fixed-income assets, where Fiera got its reputation, accounted for 64% of its assets in 2012. That’s down to 50.9%.

Lastly, and probably most importantly, non-Canadian revenue now represents almost 50% of Fiera’s annual revenue compared to just 1% four years ago.

An investment in Fiera’s stock today is an entirely different risk profile than in 2012. And that’s a good thing.

Reasons to own CI Financial

In August, CI announced it was buying Sentry Investments for $780 million — an acquisition that adds $19 billion in assets under administration, or an increase of about 16%.

If you’re one of the lucky employees of Sentry who owns shares in the company, CI’s acquisition calls for a cash component of $230 million and $550 million in CI shares. I would suggest you hang on to those shares.

“[CI Financial is] paying 4.1% assets under management at Sentry, which I would suggest is a pretty stiff number,” BNN commentator Andrew McCreath said August 10. “They are paying what appears to be a full price for an asset that undoubtedly CI will be able to extract cost savings from — because that is one thing they are great at.”

To be competitive in the investment industry today, you’ve got to be big to compete. With this latest deal, CI is closing in on $200 billion in AUM. By comparison, BlackRock, Inc. (NYSE:BLK), the world’s largest asset manager, managed US$5.7 trillion as of June 30, 2017.

It’s all relative.

For me, I became interested in CI because of its purchase of First Asset in 2015. That deal got it into the lucrative ETF market. It now sits in the seventh spot here in Canada with 2.5% market share.

CI is a well-run asset manager you can be confident will be around in five to 10 years.

Which to buy?

While I like the transformation Fiera has made over the past four years, CI’s valuation — a free cash flow yield of 8.8% — and 5.1% dividend yield make it too good to pass up. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Will Ashworth has no position in any stocks mentioned. 

More on Investing

An investor uses a tablet
Investing

4 Value Stocks That Are Must Buys for Canadians in November

Whether you want to add growth or defence to your portfolio, these four stocks are some of the best Canadian…

Read more »

Oil industry worker works in oilfield
Energy Stocks

Is Suncor Stock a Buy, Sell, or Hold for 2025?

Suncor stock looks undervalued as the company continues to increases cash flows, earnings, and shareholder returns.

Read more »

monthly desk calendar
Dividend Stocks

This 7.8% Dividend Stock Pays Out Every Month

Not all monthly dividend stocks are created equal. And this top stock is certainly a strong choice for passive income.

Read more »

Canada national flag waving in wind on clear day
Investing

Top Canadian Small-Cap Stocks to Buy Now

These top Canadian small-cap stocks offer higher growth potential and could deliver stellar returns over time.

Read more »

A worker gives a business presentation.
Dividend Stocks

Is TMX Group Stock a Buy, Sell, or Hold for 2025?

TMX Group (TSX:X) stock has been a consistent wealth-builder, generating 4,630% in total returns since 2002. Should you buy, sell,…

Read more »

calculate and analyze stock
Tech Stocks

1 Stock That’s Just as Hot as Nvidia (Without All the Hype)

Nvidia stock may look like a strong option, but its valuation is through the roof. Enter this other under-the-radar stock.

Read more »

Man data analyze
Dividend Stocks

2 Deeply Undervalued Dividend Stocks to Buy in November

Here are two stocks that I view as deeply undervalued this November.

Read more »

Dividend Stocks

The 2 Best Canadian Blue-Chip Stocks to Buy Now

Blue-chip stocks can be some of the best stocks to have in any portfolio. But when they're trending upwards, investors…

Read more »