What are we looking for?
Market drama related to a future Fed rate hike and concern in Europe about a possible "Grexit" has had a negative impact on many Canadian stocks. With the Greek situation poised for resolution and a growing consensus of a slow start to interest-rate increases in the United States, many hard-hit stocks may be poised to bounce back.
The screen
We will be using Recognia Strategy Builder to search for Canadian stocks that have been hit hard over the past quarter and may now be showing signs of recovery.
We begin by setting a minimum market cap threshold of $1.5-billion. We wish to focus on mid- and large-cap stocks in our screen.
Next, we will look for Canadian stocks that have seen significant price declines in recent months. Specifically, we will select stocks trading within 15 per cent of their 52-week lows and which have seen price declines of at least 10 per cent in the past 13 weeks.
Finally, to find stocks that are showing signs of recovering, we will use a technical analysis tool known as RSI (relative strength index). RSI measures a stock's current relative strength compared to its own price history. We will consider only stocks that have had a recent rise in RSI (not shown), which would indicate a move out of oversold territory.
More about Recognia
Recognia is a global leader in automated quantitative analysis and engagement solutions for retail online brokers and institutions. Recognia's product suite provides actionable trading ideas based on technical and fundamental research covering stocks, ETFs, indexes, forex, options and commodities.
What did we find?
Canadian Utilities, focused on electricity and natural gas distribution, is part of the Atco group of companies, which is also featured on our list. After recording solid stock-price performance in early 2015, Canadian Utilities reported disappointing first-quarter earnings in early April. It is now off almost 11 per cent in the past quarter; however, it has begun to stage a modest rally in the past 10 days. On June 18, the stock confirmed a "bullish RSI event," indicating a move upward out of oversold territory.
TransAlta Corp. has had a rough ride over the past three months with its stock price off 12.5 per cent. Concerns about rising interest rates have hit many utilities stocks during this period. With a 7-per-cent dividend yield and reasonable trailing P/E of 27.8, TransAlta looks like a good candidate to rebound from its recent lows.
Cheese and dairy producer Saputo Inc. announced fourth-quarter results in early June that disappointed analysts and investors. As a result, Saputo's stock price is off 11 per cent in the past 13 weeks. On June 22, the stock registered a bullish RSI event, setting the stage for a continuing rally in the stock.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Recognia Inc. in respect of the investment in financial instruments. Investors should conduct further research before investing.
Peter Ashton is vice-president of retail and self-directed investing at Recognia Inc.