The Stock: Gluskin Sheff + Associates
Yesterday's closing price: $22.50
Trend: Although the financial services industry has many layers of asset management, from umbrella services of large institutions to independent boutique shops focused on qualified, moneyed investors, all service clients with a promise of credible financial stewardship and above-market returns. That promise, when fulfilled, makes for a tidy business of handsome fees for managing the substantial assets of passive investors - especially when the market is a healthy horn of plenty.
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Signals of replenished financial services health abound. The broad U.S. asset management sector turned in a positive March, with stocks such as Eaton Vance Corp., Janus Capital Group Inc., Affiliated Managers Group, T. Rowe Price Group, AllianceBernstein Holding Ltd., Franklin Resources, and Och-Ziff Capital Management Group finishing the first quarter strongly - a telling result of an improving investment climate.
Relatively high trading volume last week in the stocks of a few Canadian asset management firms also draws attention to this group of market participants. Although the stock of Sprott Inc. has struggled in 2010, shares of Guardian Capital Group Ltd., DundeeWealth Inc., IGM Financial Inc. and Jovian Capital Corp. are trending positively. These trends have been in place since last summer, but investors can still turn to these stocks.
The Trade: The publicly traded shares of Gluskin Sheff + Associates Inc., a private wealth management firm that manages the investment portfolios of high-net-worth clients and institutional investors, performed solidly in the bullish market environment immediately after listing on the TSX in 2006. Since the beginning of last year, the stock has again been rewarding shareholders with above-market returns. Recent trading volume, by this stock's limited liquidity, has been muted; however, trading spiked last week as the stock edged upward to surpass the share price high established last November - the last period of high weekly trading volume.
Investors should look positively at this move above $22. It signals expectations that the broad stock market has some more upside, as much as giving a vote of confidence in Gluskin Sheff's asset management team, whose individual clients are required to have at least $3-million under the firm's portfolio management - no small amount. The general bullish trend for asset management stocks continues to support trade entry for this Stock Trends Bullish financial services stock.
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The Upside: Last year at this time shares traded at $10 and were about to rally to the $15 range as analysts began touting the stock to reach $20, an objective met by year-end.
The current move above $22.50 opens the door for a potential rally to the $25 region where the stock should gain support. In the context of a continued positive trend for equities and the firm's high profile among well-heeled clients, Gluskin Sheff shareholders can anticipate the stock will out-perform the market over the next quarter.
The Downside: Failure of the stock to remain above the $22 level over the immediate trading period could signal that the shares will retreat to the trend line at $21.
A Stock Trends Weak Bullish exit would be triggered if shares drop below $20.