Craig McGee is a senior consultant at Morningstar Canada.
What are we looking for?
As a follow-up to last week's look at Canadian stocks that meet multiple disciplines, this week I'll refer to the CPMS Cross Holdings list to find U.S. stocks that could be of interest under a number of investment styles. Specifically, I looked for 20 stocks that are currently held in the most U.S. 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 ratios;
- 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 500 over the past one-year period, 10 strategies have outperformed over the past five-year period and all 11 have outperformed over the 20-year history of CPMS's U.S. model portfolios.
Since inception, the average model has outperformed the index by 5.7 per cent annualized, ranging from the CPMS Income model outperforming by 2.8 per cent annualized, to the CPMS Valuation model, which has outperformed by 8.7 per cent over that 20-year period.
Investors are urged to do further research before investing in any of the stocks shown here.