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Number Cruncher

Stock screens for investment ideas from professional investors. Exclusive to subscribers of Globe Unlimited.

Number Cruncher

Battered blue chips for the contrarian investor Add to ...

What are we looking for?

Very few stocks have avoided the sharp downturn of the last few days and weeks. But some stocks may have been punished too hard. Let’s try to identify ones that have fallen sharply, but that still have stable or strong profit outlooks.

More about today’s screen

We’ll ask for help today from Morningstar CPMS, an equity research firm. We’ll look for stocks in the S&P/TSX 60 that are within 5 per cent of their 52-week lows, but that still have earnings estimates that are flat or even improved in the past 30 days.

“Sentiment is pretty negative these days due to growing debt fears and declining growth expectations, but for the contrarians out there, these stocks may be decent bargains,” said Craig McGee, a senior consultant with CPMS. “Additionally, the expected dividend yield on many of these stocks offers a sizable cushion as long as the payouts can be maintained.”

CPMS also included some columns on valuation in the table so that readers can see how these stocks rank against the rest of the Canadian companies it follows.

More about CPMS

CPMS is an equity research and portfolio analysis firm owned by Morningstar Canada. It maintains a database of about 680 of the largest and more liquid Canadian stocks, plus more than 2,100 U.S. stocks, and spends a lot of time adjusting for unusual accounting items in each company’s quarterly results to make sure screens can perform correctly.

What did we find out

One column that is included in the table is expected dividend yield, which calculates the current dividend projected over the next four quarters divided by the current price. Half the stocks in the table have dividend yields over 4 per cent, and they can be divided into two groups.

The first group of high dividend stocks are financial companies, including Power Corp. of Canada, Sun Life Financial Inc., and Manulife Financial Corp. These stocks might be interesting if you believe they will not be severely hurt, long-term, by the financial crisis in Europe and weak markets.

The other group are energy stocks, including Canadian Oil Sands Ltd., Enerplus Corp. and Husky Energy Inc. Keep in mind that these stocks may not have been hurt yet by falling earnings estimates, as some analysts may not have lowered their oil price assumptions yet for the next year.

Notes to Accompanying Table

* Grades relative to 701 Canadian stocks in the CPMS universe (A: best, E: worst).

Source: Morningstar Canada


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