Monday, January 16, 2012

Lets look at AGF Management (AGF.B).
For discussion and to determine the entry and exit points.
By using the historical P/E ratio one can determine what the entry and exit positions should be.

AGF for the past 16 years has had an average P/E trading range of 20.21 (high) and 11.39 (low).
AGF also has had some wild swings in the past, P/E value for example in 2003 AGF had a high P/E ratio of 39.79 and an really low P/E ratio of 5.24 in 2008 .

AGF has over that time had an average annual EPS growth of 8.24% . Knowing or at least estimating future earnings one can estimate future share price. In this case AGF should earn about $1.41 in 2012 and using the average P/E the estimated trading range should be 19.90 (high) and 13.95 (low)

If your wondering about dividend growth? Yes AGF has had growth in that area as well.
For the past 16 years (14 years average) AGF has increased its dividends by 21.09%.

It should be noted that AGF has had growth spurts in dividend increases for example in 2004 and 2005 AGF increased its dividend by 36% in each of those years.

For years AGF hovered around the 1% mark on the dividends ratio until 2003. Since then AGF has been returning a good portion of its earnings back to its share owners with todays P/D AGF has had a low for 2011 of 5.28% and a high of 7.53% its estimated that AGF will increase its dividend in 2012 to 1.41 from 1.30 (2011).

Now on to how to trade, As I’m looking to purchase AGF I’ll be writing a put at my price estimates in this case I’m looking to write the Put Option at $13. It would be best to sell the put for a short term however AGF has a low option following. So I’m looking to write (sell) the July put at $13 for .30 -.35 cents range.
If I were to buy and write a covered call on AGF with its current closing price of January13th at $16.92 I’d be using caution here as I believe that the general market is going to do a pull back. I suspect that it will decline until the first week of April and that point it would possibly be the best time to buy this company as it would trade closer to its lower P/E range.