Imperial Oil, Gildan Activewear, Goldcorp and a few other Canadian stocks have attracted some high-powered attention from south of the border.
We're talking Warren Buffett, one of the most respected and level-headed investors in the world; Peter Lynch, ace mutual fund manager; James O'Shaughnessy, author of What Works on Wall Street ; and money manager and author Kenneth Fisher. Oh, and Benjamin Graham, the now-deceased father of value investing and a securities analysis pioneer.
How, you may ask, could we know that Gildan is just the sort of stock that Mr. Graham would have liked? Or that Imperial Oil is Mr. Buffett's kind of company? We know thanks to a Web-based analytical service called Validea.
For its paying subscribers, Validea screens the universe of stocks to find those it believes would appeal to various investing luminaries. For this edition of the Portfolio Strategy column, Validea has supplied a list of five guru-approved Canadian stocks, plus some U.S. and global names.
Validea was founded in the late 1990s by entrepreneur John Reese, who recently wrote a book called The Guru Investor, How to Beat the Market Using History's Best Investment Strategies. You can see how these strategies have performed on the Validea.com site. Most, but not all, have outperformed the S&P 500 since inception.
You can also see Validea's stock picking in action through a pair of mutual funds offered by National Bank of Canada – Omega Consensus American Equity and Omega Consensus International Equity. Both have done well, but they've only been around for 18 months.
Now for the stocks Validea has selected for this column:
Canadian Stocks
| Ticker | Name | Sector |
Share Price ($) |
YTD % Change |
Strategy | |||||
| GIL-T |
Gildan Activewear Inc. |
Consumer Cyclical |
17.93 | 26.4 | Graham, Lynch | |||||
| Notes: Montreal-based Gildan makes t-shirts and fleeces, as well as socks and work uniforms. Validea says Gildan gets a nod from the Peter Lynch model because it’sa fast-growing company. The long-term growth rate in earnings per share is 20.4 per cent, and the Price-Earnings to Growth (PEG) ratio is a strong 0.59. The PEG ratio takes a stock’s earnings per share and divides it into its Price-Earnings Ratio. The PEG is used to value stocks; the lower the PEG, the more a stock can be considered a bargain. | ||||||||||
| IMO-T |
Imperial Oil Ltd. |
Energy | 41.84 | 2.1 | Buffett | |||||
| Notes: This Calgary-based energy giant scores well using the Warren Buffett model because, for one thing, it has grown earnings in all but one year through the past decade. Also, it has a low debt level in comparison to its earnings, and it has averaged a high 31.7-per-cent return on equity over the past 10 years. | ||||||||||
| CP-T |
Cdn. Pacific Railway Ltd. |
Transportation | 42.61 | 4 | Lynch | |||||
| Notes: CP Rail operates 24,000 kilometres worth of track across North America. Under the Peter Lynch model, CP is considered a "stalwart" because of its high annual sales of $4.2-billion (U.S. ) and moderate long-term earnings per share growth of 11 per cent. CP also scores well in the Lynchian universe through its PEG ratio of 0.88 (adjusted for the stock’s dividend yield) and a manageable debt-equity ratio of 76.6 per cent. The debt-equity ratio measures debt in relation to shareholder equity, or total assets minus liabilities. | ||||||||||
| TLM-T |
Talisman Energy Inc. |
Energy | 17.11 | 40.5 | Lynch | |||||
| Notes: Calgary-based Talisman is a energy company with interests in the UK, Scandinavia Southeast Asia and North America. Another Peter Lynch choice, Talisman gets points for being a fast grower. The PEG ratio is low at 0.12 and the 32.84-per-cent debt/equity ratio is solid. | ||||||||||
| G-T |
Goldcorp Inc. |
Basic Materials |
42.09 | 9.6 | Lynch | |||||
| Notes: The Peter Lynch model strikes again. This Vancouver-based gold producer is a fast-growing firm with a low PEG of 0.33 and a debt-equity ratio of under 1 per cent. | ||||||||||
