I love this stuff, especially after having performed a similar calculation twenty-four months ago and reached an identical conclusion.  A classic Graham-and-Dodd play.  Currently approx. 10% of the real [read: seldom-disclosed] Anodyne Inc.

Q:  Value catalyst?

A:  Nothing immediately on the horizon, but the dividend's credible (2%).  A better way to think of Guardian is as the equivalent dollar amount of BMO stock, with a scratch-and-win ticket stapled to it.  Even if the stratch-and-win is a loser, you still have the (not inconsiderable) BMO retained earnings for the length of your holding period.

"The company’s easiest-to-value asset is a 5-million-share hoard of Bank of Montreal stock, worth about $280-million at the end of the first quarter. Guardian received the stock more than a decade ago when it sold its mutual fund business to the bank. The BMO stock holding alone works out to $8.20 a share, or nearly the same as the current stock price. Also easy to visualize are the company’s holdings of cash and other marketable securities, worth $104-million or $3.06 a share.

The money management arm of the company makes for a relatively easy assessment, too. Wealth managers catering to institutions are typically valued at about 1 per cent to 3 per cent of the assets they oversee. Mr. Hardie took some of the lower assessments in that range and calculated the worth of Guardian’s operation at $274-million, or $8.10 a share, once again not too much different than the current share price Adding up the sum of the assets and subtracting the debt, you come up with a very inexpensive stock. Conceptually, investors are either getting the BMO shares or the money management business almost for free."
- posted by cjb @ 9:50 AM