By James Langton
(November 3 – 17:10 ET) – Merrill Lynch remains focused on fundamental values despite the recent surge in trading of mutual fund company stocks as well as ensuing take-over speculation.
Merrill’s top picks are still AGF and Investors Group, although the sales battle continues to rage between C.I. and Fidelity. Merrill suggests that the industry will book $1.5 billion in in-flows for October, up sharply from last October’s $249 million.
Net sales concentration remains high, with AGF maintaining its momentum. CIBC continues to lead deposit-takers. Synergy continues to post good sales too.
Merrill says the big drop in Nortel Networks, which has hammered the Canadian market, will have limited effects on fund companies. “Our analysis indicates just 0.4% of current fiscal year management fee estimates are at risk.”
It estimates that AGF is most exposed to Nortel with an estimated 2.4% in its entire asset base. Mackenzie is next at 1.7%. Investors Group and C.I. both have overall exposures under 1% of total assets.
Although Merrill doesn’t dismiss takeover talk entirely, it says investors shoulod focus on fundamentals. Both Mackenzie and Investors are the object of take-over speculation with American Express tipped as the possible acquiror.