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Number Cruncher

Looking for best-in-class U.S. stocks Add to ...

What are we looking for?

Last week, we focused on Canadian industry leaders. Today we take our search for promising stocks on the road and spotlight larger U.S. firms that stand out among their peers for both their demonstrated ability to grow and the rising expectations around them.

More on today’s screen

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Craig McGee, senior consultant at CPMS, a division of Morningstar Canada, constructed the screen, which is based on the CPMS U.S. Industry Relative strategy.

The strategy ranks stocks primarily on growth criteria in comparison with each stock’s industry group. It emphasizes earnings momentum, estimate revisions and earnings surprises.

To the end of 2011, the strategy posted annualized returns of minus 0.5 per cent over the prior five years and 4.5 per cent over 10 years. The S&P 500 came in at minus 0.3 per cent and 2.9 per cent, respectively, over the same periods.

So far this year the strategy is up 8.5 per cent to Jan. 27, while the S&P 500 Total Return Index is up 4.8 per cent.

To ensure that today’s list is sufficiently diversified, Mr. McGee allowed no more than three stocks from any one industry group.

More about CPMS

CPMS provides quantitative North American equity research and portfolio analysis to primarily institutional clients. It covers more than 700 Canadian and 2,200 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?

Apple, of course. It’s no surprise the company that Steve Jobs built is among the industry leaders pinpointed by our screen.

But some selections are more surprising. There’s Dell, for instance, which is nearly the anti-Apple in terms of style appeal. Macy’s, Philip Morris and U.S. Bancorp are among the other emerging industry leaders that might have slipped beneath your radar.

Of course, investors should always do their own research before buying.

Follow on Twitter: @IanMcGugan

 
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