Strategists at UBS believe that the profit cycle is entering a more mature phase, meaning that the double-digit growth that investors have seen recently is about to slow down to something that moves in line with nominal gross domestic product growth. For the case of the S&P/TSX composite index, earnings are expected to grow about 27 per cent in 2011, but that will slow to an expected 6 per cent gain in 2012.
"Accordingly, we expect performance to transition from high beta and earnings momentum plays to 'quality' stocks as the underlying landscape shifts," said George Vasic, UBS strategist.
The firm's global equity strategy team recently ran a screen to find the top "quality" candidates, using 12 criteria related to profitability, valuation, leverage, growth and dividends.
BCE Inc. was the only Canadian stock to crack the top 50 list. Among some of the U.S. stocks: Mattel Inc., Intel Corp., Abbott Laboratories, Kraft Foods Inc., PepsiCo Inc. and Chevron Corp.
However, Mr. Vasic constructed a Canada-only list of 10 names, which of course included BCE. The other nine: Suncor Energy Inc. , First Quantum Minerals Ltd. , Canadian Pacific Railway Ltd. , Thomson Reuters Corp. , Loblaw Cos. Ltd. , Valeant Pharmaceuticals International Inc. , Royal Bank of Canada , Research In Motion Ltd. and Fortis Inc.