IGM FINANCIAL INC. $33 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 262.4 million; Market cap: $8.7 billion; Price-to-sales ratio: 3.2; SI Rating: Above Average) is Canada’s largest mutual fund company. It manages $98.8 billion of assets. Power Corp. owns 56.4% of IGM.

IGM has three divisions. Investors Group sells funds through its own network of advisors. Mackenzie Financial sells its funds through independent brokers. IGM also owns 74.5% of Investment Planning Counsel, whose 700 advisors provide wealth-management services to individuals. IGM has few operations outside of Canada.

The sharp stock market drop in the latter half of 2008 hurt demand for IGM’s mutual funds. As a result, the company’s earnings dropped 11.3%, to $766.1 million from $863.8 million in 2007. Per-share earnings fell 10.5%, to $2.89 from $3.23, on fewer shares outstanding. IGM owns around 4% of Great-West Lifeco, and these figures exclude its share of Great-West’s writedown of its purchase of Putnam Investments. IGM’s 2008 revenue fell 6.6%, to $2.7 billion from $2.9 billion.

Investors Group expanded its sales force by about 12%, to 4,480 advisors over the past year. The extra costs to train these new employees weighed on IGM’s 2008 profits. However, these employees should become more productive this year, and this will begin to offset the cost of training them. As well, Investors Group’s focus on customer service helps it hang on to its clients. Its 2008 redemption rate of 7.9% was well below the industry average of 19.2%.

IGM’s $1.2-billion long-term debt is a low 14% of its market cap. It also holds cash of $1.2 billion, or $4.70 a share. Both of these factors will help IGM cope with the recession. Its strong balance sheet should also let IGM keep paying its $2.05 dividend, which yields 6.2%. The stock trades at 13.8 times its forecast 2009 earnings of $2.39 a share.

IGM Financial is a buy.