Financial 15 Split Corp. and Financial 15 Split Corp II: Market and Portfolio Update
21 Ottobre 2008 - 10:37PM
Marketwired
Fueled by the intensification of the ongoing credit crisis, world
financial markets reached a level of "panic" during the last
several weeks which arguably has never been seen by investors on
such a global scale. Several of the largest financial institutions
in the United States and around the world required unprecedented
government intervention in order to rescue them from complete
insolvency. Others were required to make emergency decisions to
save their businesses by being acquired by other stronger partners.
The volatility index reached record levels indicating investor fear
was at historically high levels. In the short term, this financial
crisis has had a very broad and severe impact on investments across
the world. All sectors of the financial markets from financial
services stocks to commodity based stocks have been aggressively
sold down. It appears the selling pressure has been greatly
exacerbated by forced liquidation required by assorted investment
funds responding to redemption demands and the need to de-lever
their portfolios to meet margin calls. This has caused dramatic
short term moves as these funds try to raise "cash" from the most
liquid sources which in many cases are the large capitalization
stocks. Governments around the world have delivered a clear message
that they are willing to continue to take significant action and do
whatever is necessary to support financial markets and restore
confidence. The Manager believes these actions will ultimately
prove to be the pivotal turning point in the recovery of financial
markets.
The impact of the broad based selling has adversely impacted the
portfolios of Financial 15 Split Corp. ("Financial 15") and
Financial 15 Split Corp. II ("Financial 15 II"). The net asset
values have declined by approximately 15% from August 31, 2008 to
October 15, 2008. The Manager believes current valuations of many
of the stocks in the portfolios are now trading at extremely
attractive levels. In particular, dividend yields on the portfolios
have reached historically high levels compared against fixed income
securities and the level of inflation. The current yield in the
underlying portfolios is 5.4%. Most of the companies in the
portfolios have excellent earnings growth histories and have long
records of maintaining and growing their dividends over time. As
interest rates are expected to continue to decline over the coming
months, these higher dividend yields should provide meaningful
support to the stock prices of these companies even through this
economic slowdown. As a result of the volatility index reaching all
time record highs, the option premiums available in the market are
also attractive and are allowing the Manager to add significant
levels of additional income to the portfolios. The current
portfolios have a weighting of approximately 78% in the 10 Canadian
core financial services companies and 22% in the 5 core US
financial services companies. The current government actions are
expected to result in significant improvement in the credit markets
over the coming months and allow a return to a more favourable
operating environment for financial services companies. In
addition, when capital market liquidation slows or ceases and
investors return to fundamentals of the underlying companies, we
believe the portfolios will be fairly rewarded. High dividend
yields, low valuations and significant option premiums available in
the market place all bode well for the Financial 15 and Financial
15 II portfolios. The Manager continues to actively manage the
relative weightings of the companies held within the
portfolios.
Financial 15 invests in a high quality portfolio consisting of
15 financial services companies made up of Canadian and U.S.
issuers as follows: Bank of Montreal, The Bank of Nova Scotia,
Canadian Imperial Bank of Commerce, Royal Bank of Canada,
Toronto-Dominion Bank, National Bank of Canada, Manulife Financial
Corporation, Sun Life Financial, Great-West Lifeco, CI Financial
Income Fund, Bank of America, Citigroup Inc., JP Morgan Chase &
Co., Merrill Lynch, Wells Fargo & Co. Shares held within the
portfolio are expected to range between 4-8% in weight but may vary
at any time.
Contacts: Financial 15 Split Corp. Investor Relations (416)
304-4443 or Toll Free: 1-877-4-Quadra (1-877-478-2372) Website:
www.financial15.com
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