Q: I have owned IFC for a while; its share price has gained nicely in the last 12 months or so but I am concerned it is becoming a bit richly value and am considering a switch to CB. What is your view of this change? Would you stick with IFC or make the switch, and why? Many thanks for your excellent service.
5i Research Answer:
IFC trades at 19X earnings, which is on the high end of its historical range, but it has been over 25X in the past (2019) and has had some years over 20X. CB has also done well this year, but is 13X, slightly below its historical range. IFC has a higher dividend yield, and gets the dividend tax credit in Canada. CB is much larger, IFC has higher projected earnings growth based on consensus. We think both are quality companies. We would be OK with a switch if one wanted some US exposure, but we would largely consider it a wash (tie) here, with IFC's better growth offsetting its valuation. We would be far less inclined to switch if taxes applied to any sale.