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Number Cruncher

Presenting the best-performing investing style of 2012 (so far) Add to ...

What we’re looking for

The best performing investing style of 2012.

To find what’s in style, we turned to S&P Capital IQ, which tracks eight strategies or “style indicators,” as it calls them. The winner so far this year is one based upon fundamental valuations, which has produced a 16.7 per cent return.

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How it works

Jamie Hynes, sales director with S&P Capital IQ, screened the Capital IQ global database for Canadian stocks that ranked highest on six factors (three of which are shown here) that make up the Valuations Style Indicator:

-low share price to book value per share;

-low share price to free cash flow per share;

-low share price to forward earnings per share;

-low share price to earnings adjusted for estimated long-term earnings growth and dividend yield;

-high EBITDA (earnings before interest, taxes, depreciation and amortization) to enterprise value (a company’s market capitalization plus net debt);

-low share price to operating cash flow (relative to companies in same industry).

In the accompanying chart, a stock’s ranking on these factors is given in terms of percentiles of the S&P/TSX composite. A stock with a percentile ranking of 1 is in the top 1 per cent of the market for that criterion; one with a percentile ranking of 100 is in the bottom 1 per cent.

More about S&P Capital IQ

S&P Capital IQ offers a comprehensive set of tools for fundamental analysis of global securities, idea generation and workflow management. Its Web- and Excel-based platform provides access to both real-time and historical information on companies, markets, transactions and people around the world.

What we found

Many of the top 20 stocks in the valuations-based model have done poorly over the last year. This is typical of any value-based strategy – the stocks that are today’s biggest bargains tend to be ones that have tumbled out of favour and are therefore cheap.

To make sure you’re not buying a “value trap” that is cheap for a good reason, you should do your own research before buying any of the names listed here. You should also be prepared to be patient. While a value-based investing strategy has produced good results over time, no style is always in fashion.

 

S&P Capital IQ's Valuations Style Indicator

Company Ticker Closing price $ (Nov. 6) Mkt. cap. ($ mil.)
Dorel Industries Inc. DII.B-T 37.67 1,188.20
Westjet Airlines Ltd. WJA-T 17.96 2,402.50
Aecon Group Inc. ARE-T 11.42 637.4
Pacific Rubiales Energy PRE-T 23.42 6,921.50
Cott Corp. BCB-T 8 761.6
Dundee Corp. DC.A-T 25.81 1,412.70
Quebecor Inc. QBR.B-T 35.24 2,211.20
Manulife Financial Corp. MFC-T 12.52 22,802.20
Genworth MI Canada Inc. MIC-T 21.06 2,078.50
Inmet Mining Corp. IMN-T 56.76 3,937.20

Unless indicated otherwise, all values are percentile rankings relative to the S&P/TSX composite index (1 is best; 100 is worst); Source: S&P Capital IQ

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  • DII.B-T
  • WJA-T
  • ARE-T
  • PRE-T
  • BCB-T
  • DC.A-T
  • QBR.B-T
  • MFC-T
  • MIC-T
  • IMN-T
  • S-T
  • TDG-T
  • TCL.A-T
  • SVY-T
  • CLS-T
  • NSU-T
  • MDI-T
  • CFW-T
  • RIM-T
  • ASR-T
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