IGM Financial Inc (TSX: IGM). is a Canada-based wealth and asset management company. The Company’s principal businesses are Investors Group Inc. and Mackenzie Financial Corporation, which operates within the advice segment of the financial services market.

Why Investor’s Should Book Profit?

• Higher uncertainties over global equity market: The equity market across the globe has had splendid rally since March 2020. Many developed market indices registered multiple record highs in the same time, despite underlying strength in the broader economy was not that much strong and recovery pace has been slower that what was expected. Further, rising inflationary pressure is another concern where corporates are able to report topline growth but lagging on the bottom-line front, because of the decline in the margin front as raw material prices has gone through the roof. These things could disrupt the bull rally we are seeing now, and equity rerating can happen. All these things could hurt equity portfolio performance of the IGM, which can have weigh on the group’s total average asset under management as well.
• Hovering uncertainties over Global Debt Market: Present inflationary pressure indicates that rate hike is not so far. If rate hike takes place there will sell-off in the outstanding debts, which will bring bond prices down and yield will go up. As the IGM manages debt portfolio for its clients, a rate hike would take a toll on the performance of debt funds as well.
• RSI hovering in an Overbought zone: On daily price chart, shares of IGM has entered an overbought zone, as the leading momentum indicator hovering near 73, which is typically considered as an overbought zone in technical analysis.

Technical Price Chart (November 04, 2021).  Source: REFINITIV, Analysis by Kalkine Group

• Overbought on Weekly price chart as well: IGM share are looking overbought on weekly price chart as well, as 14-Period RSI is hovering above 70. Also, we noticed a reversal candle on the last trading session from the 52W high levels.

Valuation Methodology (Illustrative): P/E-based valuation

Stock Recommendation

Despite decent fundamentals of IGM financials, the company is highly exposed to volatility in market risk (equity and debt market), which has heightened given the increased inflationary pressure, resurgence in the COVID-19 cases, stretch valuation across the global equity market. Therefore, based on the above rational and valuation done, we recommend a “Sell” rating on “IGM” stock at the closing price of CAD 49.52 (November 04, 2021).

1-Year Price Chart (as on November 04, 2021). Source: REFINITIV, Analysis by Kalkine Group.

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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