Mr. Bowman is a portfolio manager at Hamilton-based Wickham Investment Counsel Inc., an adviser to high-net-worth clients.
What are we looking for?
According to Environics Analytics, the average net worth per household in Canada was $442,130 at the end of 2013, and the Federal Reserve recently reported the average household net worth in the United States is $534,000 (U.S.). Since a good chunk of that is invested in the capital markets, my colleague Rob Belanger and I thought we would take a look at global investment firms.
The screen
We started with companies larger than $1-billion in market capitalization and sorted them from the largest to the smallest.
The price-to-earnings ratio (P/E) is a valuation metric of a company's share price compared with its per-share earnings. We are looking for a low number.
The PEG ratio is a stock's price-to-earnings ratio divided by the growth rate of its earnings. The lower the PEG ratio, the more the stock may be undervalued.
The free cash flow yield compares the free cash flow per share a company is expected to earn against its market price per share. We are looking for a low number.
Sales growth had to be positive, and our companies had to pay a dividend.
The efficiency ratio, which is expenses divided by revenue, gives investors a clear view on how efficiently the company is being managed. We are looking for a low number.
Return on equity (ROE) measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. A high number is favoured, and only companies with an ROE greater than 5 per cent are included.
What did we find?
Waddell & Reed Inc.'s Advisors Group of Mutual Funds was introduced throughout the United States in 1940, making the firm one of the oldest mutual fund companies. Waddell & Reed scores the best on our list in sales growth, PEG ratio, and ROE.
Henderson Group PLC leads our companies with the lowest P/E ratio. The firm was established in 1934 to administer the estates of British financier Alexander Henderson.
Last Friday, shares of Janus Capital jumped more than 43 per cent following the hiring of bond king Bill Gross after his departure from the firm he founded, Pimco. Janus has the best free cash flow yield.
Canada's IGM Financial Inc. leads the pack in the efficiency ratio, and the dividend yield.
Consult an investment professional or conduct further research before buying any of the companies listed here.