(B)(N) GS Gluskin Sheff & Associates Incorporated

Deal Book. The wealth management firm, Gluskin Sheff & Associates Incorporated, is publicly owned (that is, it has external shareholders who do not work for the firm) and apparently has been seeking bids for its stock, but did not receive what it would deem to be an appropriate offer and has taken itself off the table, at least for now (Reuters, April 15, 2013, Gluskin Sheff says sought sale, but will stand pat).

But what is an appropriate price? One that is possibly moderated by a requirement for an appropriate new management since one is buying a stable of about a dozen well-regarded “portfolio managers” and assets under management of about $5.7 billion, a substantial portion of which, we understand, belongs to the principals who might withdraw it and continue to manage it for themselves (which is what we would do).

The current market value is $18 per share or $305 million and the company paid a discretionary dividend of $0.825 per share last year, or $14 million, for a current yield of 4.5%. On the other hand, in so far as anyone is willing to buy these shares, the Risk Price (SF) is $17 and that would put a fair market value of $285 million on the firm, although the estimated downside volatility is also minus ($1.50) so that the Risk Price (SF) could be hit at any time, and possibly tomorrow.

The scuttlebutt (ibid, Reuters) is that the banks should be interested because they are said to be interested in managing other people’s money and, especially, those with lots of it, because they tend to manage $30,000 with the same élan, overhead, and offerings as $3 million or $30 million or, even, $300 million, if such an account exists for disbursement to various ETFs, index funds, balanced funds, and so forth (please see our recent Post, What’s A Girl To Do?, April 2013). And if the bank is willing to pay $1 for $20 of assets to manage ($5.7 billion divided by $300 million), then it seems to us that the bank should also be willing to pay their clients or customers for the opportunity to manage their money, instead of the other way around. As a matter of fact, 5% of the assets is more than enough to provide a 100% Capital Safety guarantee, and their expertise, a hopeful, but not necessarily guaranteed, return above the rate of inflation.

Exhibit 1: (B)(N) GS Gluskin Sheff & Associates Incorporated – Risk Price Chart

Gluskin Sheff & Associates Incorporated is a wealth management company that provides discretionary investment management services to high net worth private clients and institutional investors.

(Please Click on the Chart to make it larger if required.)

From the Company: Gluskin Sheff  & Associates Incorporated is a publicly owned investment manager. The firm also provides wealth management services. It provides its services to high net worth investors, including entrepreneurs, professionals, family trusts, private charitable foundations, pension and profit sharing plans, pooled investment vehicles, charitable organizations, corporations, institutions, and estates. The firm manages separate client focused equity, fixed income, and alternative investments portfolios. It also launches and manages equity and balanced mutual funds for its clients. The firm invests in the public equity, fixed income, and alternative investment markets across the globe. It invests in value, income, and growth stocks employing a fundamental analysis with a bottom-up stock approach. For its fixed income, the firm invests in corporate and government bonds with short duration. For its alternative investment portfolio, it employs long only, long short, credit arbitrage, and hedging strategies. Gluskin Sheff & Associates Incorporated was founded in 1984 and is based in Toronto, Canada.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
“Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

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Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.