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Number Cruncher

Stock screens for investment ideas from professional investors. Exclusive to subscribers of Globe Unlimited.

Entry archive:

These 10 stocks look like bargains in a hot U.S. market

PETER ASHTON

What are we looking for?

U.S. stocks looking well valued despite the recent stock market run-up.

Since the U.S. election in early November, U.S.-listed stocks have surged ahead with the S&P 500 shooting up 12.8 per cent and the Dow up 14.6 per cent. The U.S. Federal Reserve’s decision to begin winding down its $4.5-trillion (U.S.) in debt securities – revealed in minutes released Wednesday of the Fed meeting earlier this month – has spurred further bullish sentiment among investors. With U.S. stock markets now at or near all-time highs, is there still good value to be found?

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Twenty-two U.S. large caps showing good short-term earnings growth

IAN TAM

What are we looking for?

Large U.S. names showing good short-term earnings growth that have surprised analysts.

The screen

Year to date, the S&P 500 total return index is up roughly 8 per cent, in a continued bull run that spans back to the post-housing crises in the United States. Some investors feel the U.S. market may be fully valued, while others feel the economic outlook continues to be positive. Arguments can be made for both sides. This week, I use Morningstar CPMS to create a strategy that looks at the best combination of the following factors (considering both safety for the more bearish and growth for the bullish):

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How Canada's biggest 20 stocks by market cap stack up on key metrics

RYAN GOTTSCHALK

What are we looking for?

Value opportunities among Canada’s largest publicly traded companies.

The screen

Seeking to identify companies with low valuation metrics relative to peers is a foundational principle of value investing. Today’s screen includes the top 20 largest companies in Canada as ranked by market capitalization, as well as four key valuation metrics. These metrics are shown on a per-share basis and include:

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Seven financial dividend stocks with limited mortgage exposure

SCOTT CLAYTON

What are we looking for?

Financial stocks with limited mortgage exposure, but strong growth potential and sustainable dividends.

The screen

The Home Capital meltdown has highlighted the volatility for financial stocks with significant exposure to real estate lending. We still like Canada’s Big Five banks. That’s because their high lending standards cut risk. However, it’s also a good time to diversify your financial-sector holdings beyond the banks – especially if you focus on stocks that pay sustainable dividends.

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These 15 dividend stocks surface in our search for value in Canada's oil patch

SEAN PUGLIESE

What are we looking for?

With oil hovering near its low for 2017 and the Saudis and Russians extending their supply cuts, my associate Allan Meyer and I thought it would be interesting to evaluate selected oil and gas companies using our investment philosophy focused on safety and value.

The screen

We started with Canadian-listed oil and gas companies with a market capitalization of $1-billion or more, sorted from largest to smallest. Dividend yield is the annualized projected dividend per share divided by price per share. All companies on this list are projected to pay a dividend. Allan and I like to get paid while we wait for capital appreciation, and dividends generally reflect safety and stability.

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These 17 leisure companies show strong price momentum

RYAN GOTTSCHALK

What are we looking for?

North American companies associated with the hotels, leisure and gambling industries that show strong price performance and profitability metrics.

The screen

With the weather getting warmer and the summer months almost upon us, vacation plans and resort getaways seem to be at the front of everyone’s mind these days. While hotel and resort destinations can offer a small taste of paradise, they can also be a great addition to an investor’s portfolio and can offer some excellent returns. Today’s screen looks at North American companies found in the hotels and leisure global industry classification standard (GICS) – excluding restaurants – and seeks to identify and analyze strong trends in recent performance.

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These 14 international stocks could offer good value

CRAIG McGEE

What are we looking for?

Growing international leaders at lower valuations.

The screen

International equity markets have been surging despite increasing uncertainty around the structure of the European Union, unresolved and potentially pivotal election results and the impact of U.S. protectionism. The MSCI EAFE index, which measures the performance of equities from developed markets in Europe, Asia, Australia and the Far East, has posted a total return of 12.6 per cent in U.S. dollars so far this year. Given the market’s rising and possibly lofty valuations, investors may be in search of higher quality companies at reasonable valuations for a better margin of safety.

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These dividend-paying stocks offer a low-risk way to play rising cannabis demand

SCOTT CLAYTON

What are we looking for?

Highly sustainable dividends from companies positioned to indirectly profit from the quickly growing industry.

The screen

Which marijuana producers will see their shares rise to new highs, and which will see them go up in a puff – or two – of smoke? That’s hard to say, given hot-house market caps, low barriers to entry and government regulations yet to be written. Instead, we think a far better way to profit from the coming boom is to invest in companies with an established base of business outside of pot production, but set to indirectly profit from booming demand. They must also offer sustainable dividends.

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These 15 stocks put analysts’ growth projections put to the test

IAN TAM

What are we looking for?

U.S. companies that sell-side analysts predict will grow in the upcoming fiscal year.

The screen

Opinions are mixed on how much stock pickers should rely on sell-side analysts to determine their stock selection. In the past, analysts have been criticized because of potential biases in working at the same institution that promotes the sale of the securities they are analyzing. Although securities laws prevent sell-side analysts from speaking directly to anyone in the investment banking department, investors may still feel there is an inherent bias in the nature of the relationship. Regardless, this week I put analyst sentiment to the test by creating a strategy that focuses largely on what growth projections are from the sell-side community. The strategy ranks stocks on the following factors:

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Six Canadian companies that could capitalize on lower loonie

PAUL HOYDA

What are we looking for?

Canadian companies that might benefit from a low dollar in the short term and have a strong relative valuation to their industry peers.

The screen

The loonie has taken a beating lately, and over the past five years has dropped almost 30 per cent against the greenback. The currency last traded close to 73 cents (U.S.) as oil prices continue to flutter between $45 and $55 a barrel.

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Nine Canadian stocks that are undervalued wealth producers

JEAN-DIDIER LAPOINTE

What are we looking for?

Undervalued Canadian companies producing positive shareholder wealth.

The screen

We screened the S&P/TSX composite index with only three simple but powerful criteria:

  • An economic performance index, or EPI (return on capital divided by cost of capital) greater than one. An EPI ratio of one or more indicates a company’s capacity to create wealth for its shareholders (a higher EPI displays a greater rate of wealth creation);
  • A return on capital greater than 10 per cent;
  • A negative future-growth-value-to-enterprise-value ratio (FGV to EV) – This represents, in percentage, the portion of the enterprise value that exceeds the company’s current operating value. The higher the number, the higher the baked-in premium for expected growth, and the higher the risk. A negative figure reflects a discount.

The price-to-earnings ratio, beta, dividend yield and four-year annualized dividend growth rate are displayed for informational purposes. (Note that a stock with beta of less than one has historically moved less than the index to which it belongs.)

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Nine stocks that fit an investment strategy focused only on quality

IAN TAM

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What are we looking for?

Quality.

The screen

Today, I used Morningstar CPMS to construct a concentrated equity portfolio with one sole focus: quality. In the equity markets, quality can be defined in many different ways, but for today I ranked stocks using a combination of the following metrics:

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These 20 emerging-market equities boast price momentum and attractive valuations

KHALED ENIBA

What are we looking for?

Emerging market equities reflecting a combination of positive price momentum, upward analyst revisions and attractive valuations.

The screen

Looking back at U.S. President Donald Trump’s first 100 days, there is growing concern among investors over campaign promises to revamp Dodd-Frank, cut taxes and boost public spending after the administration failed to push through health-care reform and unveiled a tax plan that’s short on details.

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Fifteen potentially undervalued Canadian companies

CRAIG McGEE

What are we looking for?

A diversified group of undervalued Canadian companies.

The screen

Four months into 2017 and we continue to see equity markets rally forward. The S&P/TSX composite total return index extended its streak with a 15th consecutive positive monthly return, a record number dating back to 1956. Over this 15-month period beginning Feb. 1, 2016, the index has gained 26 per cent. The surge has some investors questioning whether the market still has room to run or if valuations have gone too far ahead of themselves.

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Seven U.S. banks poised to benefit from possible Dodd-Frank changes

PETER ASHTON

What are we looking for?

U.S. bank stocks poised to see increased profitability under possible changes to the Dodd-Frank Consumer Protection Act.

In 2010, U.S. President Barack Obama signed the Dodd-Frank Act, which was aimed at providing enhanced regulation of U.S. banks in order to protect consumers. After the financial crisis, U.S. legislators felt that the banks had taken unnecessary financial risks and that taxpayers were being asked to pick up the bill for their mistakes. Among other things, Dodd-Frank’s Volcker Rule limits U.S. banks from proprietary trading, in which deposits are used for trading in the bank’s own accounts.

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Ten stocks trading at or below sector median that also show short-term growth

IAN TAM

What are we looking for?

Companies trading below historical and sector valuations but showing positive short-term growth.

The screen

Kristine Owram of Bloomberg News interviewed key strategists in Canada who have opposing views on valuations in Canada. With this in mind, I have used Morningstar CPMS to look for companies in Canada that are still trading below their sector median and 10-year historical median valuation metrics, while showing positive short-term growth in earnings and positive analyst sentiment. The strategy ranks stocks on the best combination of:

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Nine U.S.-listed stocks with the potential for earnings surprises

HUGH SMITH

What are we looking for?

U.S.-listed companies with the potential to surprise analysts and investors when they report financial results in this quarterly earnings season.

The screen

Corporate America is in the middle of its biggest earnings week in more than a decade. Some 190 members of the S&P 500 report this week, accounting for roughly 40 per cent of the index’s value. A stronger-than-expected earnings report can cause a company’s stock to spike, so identifying companies that will surprise the market can be very valuable.

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Sixteen U.S. large-cap dividend stocks that offer robust performance

JEAN-DIDIER LAPOINTE

What are we looking for?

We’re looking for large-cap U.S. companies offering robust economic performance and high free cash flows.

The screen

We have screened the S&P 500 stocks with the following criteria:

  • A minimum market cap of $10-billion (U.S.);
  • An economic performance index, or EPI (return on capital divided by cost of capital) of 1.5 or higher. An EPI ratio of one or more indicates a company’s capacity to create wealth for its shareholders (a higher EPI displays a greater rate of wealth creation);
  • A return on capital of 15 per cent or higher;
  • A five-year average return on capital of 15 per cent or higher;
  • A free-cash-flow-to-capital ratio of 5 per cent or higher. This ratio gives a sense of how well the company uses the invested capital to generate free cash flows, which could be used to stimulate growth, pay and/or increase dividends, reduce debt, etc. A positive figure is good, 5 per cent and above is excellent;
  • An annualized dividend growth rate of 5 per cent or above on the one-, two-, three- and four-year horizons;
  • A future-growth-value-to-market-value ratio of maximum 70 per cent – FGV represents, in percentage, the portion of the market value that exceeds the company’s current operating value. The higher the number, the higher the baked-in premium for expected growth, and the higher the risk. A negative number reflects a discount;
  • All companies must pay a dividend.

More about StockPointer

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Six stocks for staying calm and cool in a red-hot housing market

SCOTT CLAYTON

What are we looking for?

We’re looking for stocks that tap into Canada’s hottest housing market. At the same time, they’re primed to yield highly sustainable dividends – even if government manages to turn down the heat.

The screen

All levels of government are under pressure to cool Toronto’s residential real estate prices. But low interest rates and high demand mean prices will likely continue to rise.

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Ten Canadian consumer staples stocks showing safety and value

SEAN PUGLIESE

What are we looking for?

My colleague Allan Meyer and I take a closer look at the Canadian consumer-staples sector using our investment philosophy focused on safety and value.

The screen

We started our search by filtering for Canadian-listed consumer staples with a market capitalization of $1-billion or more. We sorted the list on this metric, from largest to smallest. We view market capitalization as a safety factor, larger companies usually have more stable revenue streams. They also tend to be more liquid, they can usually be bought and sold without a significant price impact.

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Number Cruncher Contributors

Ted Dixon, CFA

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Ted Dixon is co-founder of INK Research. INK stands for Insider News and Knowledge and through www.inkresearch.com is Canada's first on-line financial news and research service providing investor insight into what public company executives and significant shareholders are doing with their ownership interests.

Follow Ted on Twitter @TedDixon

Charles Martin, CFA

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Charles Martin, CFA, works in the Financial and Risk unit of Thomson Reuters and specializes in asset management.

Craig McGee, CFA

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Craig McGee, CFA, is a portfolio manager with The Ullman Group at Richardson GMP in Toronto.

Julie Michaels, MBA

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Julie Michaels, MBA, is a relationship manager for CPMS at Morningstar Research Inc.

Michael Pe, CFA

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Michael Pe, CFA, is an Institutional Product Specialist at Morningstar Research Inc.

Sean Pugliese, CFA

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Sean Pugliese, CFA, is an investment portfolio manager at Wickham Investment Counsel, helping individuals, families and other investors.