Skip to main content
number cruncher

What are we looking for?

Upwardly trending U.S. companies that haven't attracted short sellers.

The screen

Market volatility has been spiking again amidst uncertainty in China and the euro zone, and more of the bears appear to be waking from their hibernation. For instance, short interest is over 312 million shares on the SPDR S&P 500 ETF (SPY), which is the highest level since February, 2012.

In order to uncover companies that are primed for growth but may also hold up better in a downturn, my colleague Lawrence Ullman and I used Bloomberg to find the top 15 U.S. stocks with market caps above $1-billion with the best mix of:

  • earnings yield (earnings per share divided by price);
  • free cash flow yield (free cash flow per share divided by price);
  • short interest ratio (short interest divided by average trading volume – lower is better for this screen);
  • three-month consensus earnings estimate revision;
  • return on invested capital;
  • three- and 12-month total return.

More about the Ullman Group

The Ullman Group is an independent provider of strategic private capital management services to high net worth individuals, corporations, endowments, charities and foundations.

What we found

Using Bloomberg we performed a back-test starting June 30, 1995, re-selecting an equally weighted portfolio of the top 15 qualifying stocks every three months.

Over the 20-year period, this strategy would have generated an annualized total return of 16.9 per cent compared with 8.9 per cent for the S&P 500 total return index.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates. Investors should contact a professional or do their own research before investing in any of the stocks shown here.

Craig McGee, CFA, is a portfolio manager and Lawrence Ullman, MBA, is a director, wealth management and portfolio manager with the Ullman Group at Richardson GMP in Toronto.

Companies primed for growth