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(Predrag Novakovic/Getty Images/iStockphoto)
(Predrag Novakovic/Getty Images/iStockphoto)

NUMBER CRUNCHER

Sizing up the year’s top large caps Add to ...

Mr. Bowman is a portfolio manager at Wickham Investment Counsel Inc. michael@wickhaminvestments.com

What are we looking for?

Canadian and U.S. large cap stocks that have performed the best, so far, in 2012. Our goal is to use some value and growth metrics to determine whether they are still attractive buys going into 2013.

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The screen

My colleague Rob Belanger and I ranked these companies based on their stock performance for the first 11 months of 2012. In Canada, Superior Plus rewarded investors with an 86.8-per-cent return, while in the United States, home builder PulteGroup jumped 185.9 per cent.

The price-to-cash flow values a company’s stock price relative to how much cash flow a firm is generating. A high P/CF indicates a company is trading at a high price, but may not be generating enough cash flow to support the multiple.

Return on equity is a time-honoured metric designed to measure a company’s ability to turn assets into profits. A company with a high ROE is more likely to bring the best returns to shareholders. ROEs can be negatively affected by share buybacks, asset writedowns, or paying off debt – the latter being the case with both Superior Plus and Computer Science.

A low price-to-book ratio (P/B) means the company could be undervalued.

The estimated P/E for 2013 is the current share price divided by the analysts’ earnings estimates per share for the next four quarters.

What did we find?

WestJet scores well with a P/B of 1.7 and a relatively low P/E for 2013. Software company Constellation operates in 30 countries and has a very high P/B of 10.8, which is the highest in both countries. Linamar has the lowest P/CF and the second-lowest P/B, and a single digit 2013 P/E.

Bank of America trades at less than book value, and has the lowest P/CF on the U.S. list.

One of the most surprising things is the low distributions of most of these companies. All have P/Es for 2013 lower than they are today.

With a few exceptions, all these firms score quite well on the screen and just might provide a superlative return for 2013.

 

Top Canadian and U.S. large caps to Dec. 1

Name Ticker Market Cap ($-bil) Total Return % (Dec 1, 2012)
Canada
Superior Plus SPB-T 1.12 86.75
Gildan Activewear GIL-T 4.23 83.06
West Fraser Timber WFT-T 2.99 69.65
WestJet Airlines WJA-T 2.52 62.29
Constellation Software CSU-T 2.75 61.14
ShawCor Ltd. A SCL.A-T 3.21 60.58
Rio Alto Mining RIO-T 0.88 58.62
Linamar Corp. LNR-T 1.4 56.44
Alimen. Couche-Tard B ATD.B-T 9.19 55.64

All currencies in the country of domicile. Source: Bloomberg, Wickham Investment Counsel Inc.

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  • SPB-T
  • GIL-T
  • WFT-T
  • WJA-T
  • CSU-T
  • PHM-N
  • WHR-N
  • EXPE-Q
  • BAC-N
  • MPC-N
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