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What are we looking for?

Some believe the top-performing equities of 2022 could be the “dogs” or worst performers of 2021. The view is that they become oversold, partly for tax purposes, and have the potential to bounce back the following year. But after a strong year in financial markets, it’s more difficult to find the dogs. So with the calendar year and tax-loss season approaching an end, my associate Allan Meyer and I thought we would take a closer look at this year’s dogs, using our investment philosophy focused on safety and value, in hopes of identifying opportunities for the new year.

The screen

We started with TSX-listed equities with a market capitalization of $1-billion or more. We view this as a safety factor – larger companies usually provide more stability and liquidity. To identify our dogs, we looked at companies with a 52-week total return of negative 5 per cent or worse. The list is sorted on this metric from worst to best. Although this isn’t quite the 2021 return, we view it as a good proxy. Allan and I love dividends and, as we like to tell clients, “we like to get paid while we wait for capital appreciation.” Dividends generally reflect safer and more stable earnings profiles as well, and so our list is limited to dividend payers. The dividend yield is determined by dividing the amount of the dividend by the share price. Debt to equity is another safety measure, with a lower number being better. Allan and I are also value investors and always hunting for a deal based on certain valuation metrics. One of those is the price-earnings ratio, which is the share price divided by the projected earnings per share – the lower the number, the better the value. All companies on the list generate earnings and earnings momentum is measured by the change in annualized earnings over the past quarter – another important metric. A positive number means earnings are growing, and vice versa for a negative number. Increases over the long term should translate into price appreciation and dividend bumps over time, while the opposite is true for decreases.

What we found

16 disappointing stocks that could rebound

CompanyTickerRecent Price ($)Market Cap ($B CAD)52wk Total Rtn (%)Dividend Yield (%)Debt/Equity (%)P/EEarnings Momentum (%)
B2Gold CorpBTO-T5.465.8-
Agnico Eagle Mines LtdAEM-T67.2116.5-36.72.629.717.7-7.6
Barrick Gold CorpABX-T25.1344.7-34.61.823.016.6-13.9
Yamana Gold IncYRI-T5.395.2-32.82.723.714.2-10.5
Kinross Gold CorpK-T8.3210.4-28.61.830.39.0-24.0
Pan American Silver CorpPAAS-T33.016.9-
Alamos Gold IncAGI-T10.224.0-
Centerra Gold IncCG-T9.732.9-
Wheaton Precious Metals CorpWPM-T54.7124.6-
Enghouse Systems LtdENGH-T58.003.2-
Kirkland Lake Gold LtdKL-T52.9114.0-
Cargojet IncCJT-T178.233.1-9.50.6326.929.529.1
Algonquin Power & Utilities CorpAQN-T17.7711.9-7.94.887.217.9-0.9
Saputo IncSAP-T30.4012.6-7.12.463.817.4-8.3
Dundee Precious Metals IncDPM-T8.791.7-
Northland Power IncNPI-T39.438.9-5.03.0486.126.9-51.7

Source: Refinitv Eikon & Wickham Investment CounelInc. 

The screen is dominated by precious-metal firms with a couple utilities in the mix. B2Gold Corp. scores well for safety and value. Relative to the other companies, Centerra Gold Inc. and Kirkland Lake Gold Inc. are also worth a look. Algonquin Power & Utilities Corp. boasts the highest dividend yield, while miner Dundee Corp. has the best value. Alamos Gold Inc. is the only name on the list that is debt-free. Shipping airline Cargojet Inc. is the lone company with positive earnings momentum; however, its debt is on the high side.

Investors should contact an investment professional or conduct further research before buying any of the securities listed here.

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

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