What are we looking for?
Opting for just one of the market’s popular investment strategies can be a lot like buying a cheap suit off the discount rack. No matter how much you try to talk yourself into it, none of them are a perfect fit – and they can make you look pretty bad if you wear them to the wrong occasion.
Perhaps it’s better for many investors, then, to try on an ensemble of stocks that combines several popular strategies, something that can suit a variety of market moods.
Morningstar CPMS tracks a model portfolio that does just that – bundling together top picks into what it calls the CPMS Triple 5 portfolio.
The CPMS Triple 5
Craig McGee, senior consultant at Morningstar Canada, has provided us with today’s table of 15 stocks that comprise the Triple 5 model portfolio. The portfolio includes five top picks in each of three strategies: Income, Predictable Growth and Momentum. (The picks are the stocks that score the highest on CMPS’s stock screens for each strategy.)
“Each strategy is defined by different criteria, but all three share a level of strong earnings momentum and improving expectations,” Mr. McGee said. “Income focuses on stocks with high dividend yields; Predictable Growth looks for stocks with reasonable [price-to-earnings] ratios and profitability with a history of less volatile earnings; Momentum favours stocks with high earnings and price momentum.”
More about Morningstar
Morningstar Inc. provides independent investment research in North America, Europe, Australia and Asia. Its investment research tool, Morningstar CPMS, provides quantitative North American equity research and portfolio analysis to institutional clients and financial advisers. CPMS’s data cover more than 95 per cent of the investable North American stock market.
What we found
The accompanying table lists the 15 current component stocks of the portfolio, in alphabetical order.
Since its inception in 1985, the Triple 5 portfolio has posted an annualized return of 16.6 per cent – more than double the 8-per-cent annualized return on the S&P/TSX Total Return Index.
For the year to date (as of the end of last week), the Triple 5 is up 16.5 per cent, versus a 3-per-cent gain on the S&P/TSX Total Return index.
Stocks with strong earnings momentum and improving expectations
|Bank of Nova Scotia||Growth||BNS-T||4.1%|
|Cdn. Western Bank||Growth||CWB-T||2.4%|
|CGI Group Inc.||Growth||GIB.A-T||0.0%|
|Chorus Aviation Inc.||Income||CHR.B-T||15.8%|
|CML Healthcare Inc.||Income||CLC-T||8.6%|
|Gibson Energy Inc.||Momentum||GEI-T||4.5%|
|Home Capital Group||Growth||HCG-T||1.7%|
|Intertape Polymer Grp||Momentum||ITP-T||1.8%|
|Parkland Fuel Corp.||Income||PKI-T||6.1%|
Source: Morningstar Canada
|Company||Strategy||Symbol||Expected yield||Earnings momentum||3-month estimate revision||Latest earnings surprise||Estimated price to earnings ratio||Total return YTD|
|Bank of Nova Scotia||Growth||BNS-T||4.1%||C+||B+||B-||10.4x||7.0%|
|Cdn. Western Bank||Growth||CWB-T||2.4%||C+||C-||C-||10.8x||5.9%|
|CGI Group Inc.||Growth||GIB.A-T||0.0%||C-||A-||E+||12.6x||27.2%|
|Chorus Aviation Inc.||Income||CHR.B-T||15.8%||A-||A+||A+||5.7x||29.0%|
|CML Healthcare Inc.||Income||CLC-T||8.6%||C-||C-||E+||12.4x||-4.6%|
|Gibson Energy Inc.||Momentum||GEI-T||4.5%||A+||A-||A+||23.3x||20.1%|
|Home Capital Group||Growth||HCG-T||1.7%||C+||B+||C-||8.0x||4.8%|
|Intertape Polymer Grp||Momentum||ITP-T||1.8%||A-||A+||A-||13.7x||171.3%|
|Parkland Fuel Corp.||Income||PKI-T||6.1%||A+||A+||A+||14.9x||36.0%|
|Pulse Seismic Inc.||Momentum||PSD-T||3.1%||A+||A+||A+||11.0x||49.3%|
|Sierra Wireless, Inc.||Momentum||SW-T||0.0%||A+||A-||A+||11.0x||28.3%|
|Superior Plus Corp.||Income||SPB-T||6.9%||C-||A+||A+||13.7x||56.9%|
|West Fraser Timber Co.||Momentum||WFT-T||1.0%||A+||A+||A+||33.8x||35.6%|