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The AGF Puzzle:

There was an interesting article in the National Post on Thursday that has me thinking about one of my Value holdings, AGF Management.

AGF (AGF.B) is a Canadian mutual fund company that recently has slid under $20 per share which puts their current valuation at under 10x forward earnings and a dividend yield of 5%.

In most instances a company with strong cashflow and a depressed market valuation would look towards buying back shares aggressively as a prudent method of increasing shareholder value.

AGF had previously announced a $60M plan to buy back some of its share for cancellation, but in the most recent quarter no shares had been acquired under the plan.

The article by David Pett can be found here.

This is a prime example of an opportunity I advocate to add new information into my SWOT to review on a regular basis on any company that I own. While not buying back shares isn’t the end of the world for a company or its shareholders, I have to wonder what motivation AGF management currently has in not utilizing the current buyback plan at this current market valuation.

One possibility is that they could be in private negotiations for an acquisition or sale and this is influencing their current decision.

(Disclosure: I hold shares in AGF.B)
 

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{ 2 comments… add one }
  • Dividends4Life October 2, 2008, 11:42 am

    I guess it isn’t always in the company’s best interest for the shareholders to be fully informed.

    Best Wishes,
    D4L

  • Nurse B, 911 October 2, 2008, 3:00 pm

    I can see the +/- from both sides on this one, but it does make me wonder why they wouldn’t access the cancellation they alloted for unless they still perceive their shares to only be fairly valued.

    I’m still in my position as the strengths still outweight any weaknesses, but it has me puzzled to say the least.

    Thanks for commenting D4L!

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