Buy These Two, Avoid the Parent

Article Excerpt

Holding companies tend to trade for less than the value of their various pieces (‘holding company discount’). Still, despite the apparent bargain, we only recommend the holding company over its subsidiaries when we have a high opinion of all the subsidiaries. A good example is our longtime favourite Canadian Pacific Ltd. When it broke itself up into five new companies in 2001, we saw all of the new stocks as buys. Power Corp., Toronto symbol POW, through subsidiary Power Financial Corp., Toronto symbol PWF, currently controls two of our long-time recommendations: Great-West Lifeco Inc. and IGM Financial Inc. However, Power Financial also holds several European companies. We feel that weaker economic conditions in Europe expose Power Financial investors to more risk than either Great-West or IGM. Conservative investors are better off with these two instead of the parent. Both offer value, income and an excellent way to diversify the Finance sector of your portfolio. GREAT-WEST LIFECO INC. $28 (Toronto symbol GWO;…

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