Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Eugene Fama shared the 2013 Nobel for economics in recognition of his work supporting the notion that markets are efficient, incorporating all the available information about a stock’s outlook. (JIM YOUNG/REUTERS)
Eugene Fama shared the 2013 Nobel for economics in recognition of his work supporting the notion that markets are efficient, incorporating all the available information about a stock’s outlook. (JIM YOUNG/REUTERS)

NUMBER CRUNCHER

A portfolio that deserves a Nobel Add to ...

What are we looking for?

A portfolio that a Nobel prize winner could approve.

Eugene Fama shared the Nobel for economics on Monday, in recognition of his work supporting the notion that markets are “efficient” – that they incorporate all the available information about a stock’s outlook. Prof. Fama’s work built a powerful case for indexing, but his later research incorporated a couple of factors that pure indexers may overlook.

More Related to this Story

You, of course, are no doubt intimately familiar with the Fama-French three-factor model, but for those who aren’t, here’s a simple explanation. The model suggests that investors who venture into the stock market do better over the long term than their play-it-safe counterparts who hide out in government bonds. Shareholders get an extra boost from investing in small-cap stocks, and they do even better by focusing on stocks that are trading at low prices in comparison to their book value.

How we did it

We looked for small-cap Canadian stocks that are trading for their book values or less.

More specifically, we began by examining stocks on the Toronto Stock Exchange with market capitalizations of $100-million to $300-million. (We excluded stocks below $100-million in market cap, because these typically represent very small firms that can be affected by idiosyncratic factors a screen can’t detect.) We then looked for firms trading at or below their book values (their assets minus their debts).

We did add one factor that Prof. Fama didn’t. To ensure that our list wasn’t packed with money-losing firms, we required each stock to have reported a profit over the past year.

What we found

It’s important to remember that Prof. Fama’s conclusions were based on U.S. stocks. It’s not certain that Canadian stocks will perform in the same way. For instance, our list contains many gold miners, which are unlikely to thrive unless the metal’s price recovers.

That being said, the firms on our list deserve attention. However, because they’re smaller, they’re not well covered by analysts, so it’s even more important than usual to do your own research. It may not win you a Nobel, but it could point the way to some promising stocks.

Follow on Twitter: @IanMcGugan

 

Canadian small-caps trading at low prices compared to their book value

Company Ticker Market
Cap
($-mil)
P/B P/E Recent
Price $
Total
Return
YTD %
Revenue
T12M
($-mil)
Primary Energy PRI-T 211.5 0.98 18.06 4.73 -1.20 55.8
EGI Financial EFH-T 160.2 0.95 10.11 13.74 46.17 230.7
Buhler Industries BUI-T 166.3 0.93 7.82 6.65 17.08 358.2
GLV Inc. -A GLV.A-T 158.5 0.88 93.00 3.59 81.31 582.5
Vecima Networks VCM-T 118.3 0.86 6.16 5.30 29.15 91.9
Madison Pacific -B MPC-T 130.6 0.85 13.56 2.44 -15.63 23.4
BTB REIT BTB.UN-T 124.5 0.84 6.55 4.41 10.42 57.0
Genesis Land Dev. GDC-T 160.6 0.82 4.31 3.58 9.82 137.9
Aastra Tech. Ltd. AAH-T 243.6 0.80 6.99 20.65 76.93 596.6
Partners REIT PAR.UN-T 158.7 0.80 4.53 6.14 -15.31 49.9
Retrocom REIT RMM.UN-T 296.7 0.77 3.78 4.78 -9.29 85.2
Xtreme Drilling XDC-T 268.8 0.77 23.64 3.32 100.00 205.5
Angle Energy Inc NGL-T 260.2 0.75 76.50 3.21 -10.08 143.5
Maxim Power Corp. MXG-T 190.2 0.72 8.56 3.51 30.00 175.2
Noranda Income Fd NIF.UN-T 187.9 0.68 3.07 5.01 13.70 609.1
TVA Group Inc. -B TVA.B-T 180.7 0.68 12.46 7.60 -10.48 446.8
St. Andrew Goldfields SAS-T 110.5 0.64 5.80 0.30 -38.78 159.9
Calvalley Petr. -A CVI.A-T 125.3 0.62 6.14 1.59 -11.67 60.8
Energy Fuels Inc. EFR-T 132.2 0.59 4.34 0.14 -20.00
Morguard N. Am. REIT MRG.UN-T 270.8 0.56 2.37 9.25 -13.81 101.4
Brigus Gold Corp. BRD-T 127.5 0.50 7.44 0.55 -40.22 137.7
Teranga Gold TGZ-T 179.5 0.34 1.31 0.61 -73.01 417.0
Banro Corp. BAA-T 163.9 0.33 15.92 0.65 -76.62 100.3
GVIC Commun. -B GCT-T 104.7 0.33 58.33 0.35 -12.76 313.4
Glacier Media GVC-T 110.7 0.32 24.80 1.24 -26.28 313.4

Source: Bloomberg

Print

Download table as a CSV file

View full table

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories