What are we looking for?
Technically bullish mid- and large-cap stocks that have strong value momentum scores and pay dividends.
The screen
Volatile is the best word to describe U.S. and Canadian stock markets so far this year. Bear markets lead to exaggerated moves either up or down as every piece of new information magnifies investor sentiment due to investors' higher aversion to risk. In bear markets, technical analysis tends to gain more attention as investors are looking for breaks in long-term trends.
Our screen combines technical analysis with Thomson Reuters' proprietary Value Momentum StarMine model to identify stocks in the United States and in Canada that have experienced positive price momentum and value signals, pay a reasonable dividend and are technically trading in an uptrend.
We begin by screening for stocks trading in Canada and the United States that have a market capitalization above $1-billion (U.S.) and pay a dividend greater than 3 per cent. Next, we look for stocks that have a Value Momentum score above the 90th percentile.
The StarMine Value Momentum model combines value signals to differentiate stocks that are cheap and those that are overpriced, and momentum signals to acknowledge tendencies of past trends to continue in the future. Finally, we're filtering for stocks trading above the 50-day moving average and where the 50-day moving average is above the 200-day moving average. This specific order quickly identifies stocks trading in an uptrend.
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What did we find?
The results identified eight companies that meet the criteria. Interestingly enough, six of the results include stocks trading in the utilities sector, which is considered defensive and a popular sector in turbulent markets. Using our Aggregates app, I was able to identify that the aggregated year-to-date performance of mid- and large-cap utility stocks in Canada and the United States is close to 2.43 per cent, whereas the S&P 500 and S&P/TSX have dropped, as of this screen, 7 per cent and 3 per cent, respectively. Emera Inc., the only Canadian stock on the list, is an energy and services company that has climbed about 3 per cent so far this year. Recently, the company received approval by the Federal Energy Regulated Commission to acquire Teco Energy, a Florida-based utilities company for $6.5-billion (U.S.). This acquisition will boost Emera's adjusted earnings from rate-regulated businesses to approximately 84 per cent.
This commentary does not provide individualized advice or recommendations for any specific subscriber or portfolio. Investors should conduct further research before investing.
Patrick Gattuso works in the financial and risk unit of Thomson Reuters and specializes in asset management.