Craig McGee is a senior consultant at Morningstar Canada.
What are we looking for?
Stocks that have made the grade in several CPMS model portfolios.
Stocks with fundamentals that meet a number of styles at once may reward investors, as they can attract increasing attention. This week, I’ll refer to the CPMS Cross Holdings list to find Canadian stocks that meet multiple disciplines. Specifically, I looked for the 15 stocks that are currently held in the most model portfolios.
Each model strictly follows a set of unique criteria to find stocks that meet its underlying style. The criteria vary but many share the following attributes:
-valuations such as price-to-earnings or price-to-book
-expected dividend yield;
-balance sheet strength and financial leverage;
-reported and expected earnings growth metrics such as quarterly earnings momentum (QEM), earnings surprise and three-month consensus estimate revisions;
-and price momentum.
More about Morningstar
Morningstar Inc.provides independent investment research in North America, Europe, Australia and Asia. Its research tool, Morningstar CPMS, provides quantitative North American equity research and portfolio analysis to institutional clients and financial advisers.
CPMS data cover more than 95 per cent of the investable North American stock market. With more than 110 equity and credit analysts, Morningstar has one of the largest independent institutional equity research teams in the world.
What did we find?
Out of the 11 unique model portfolios, nine strategies have outperformed the S&P/TSX composite over the past one- and five-year periods, and 10 have outperformed over CPMS’s 28-year history. Since inception, the average model has outperformed the index by 6.9 per cent on an annualized basis – ranging from the CPMS Bargain model, underperforming by 0.1 per cent annualized, to the CPMS Earnings Momentum model, which has outperformed by 13.6 per cent annualized over that period.
Investors are advised to do their own research before investing in any of the stocks listed here.
TSX stocks held in multiple CPMS model portfolios
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