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number cruncher

What are we looking for?

Some believe the top performing equities of 2023 could be the “dogs,” or worst performers, of 2022. The belief is that they become oversold partially for tax purposes, and have the potential to bounce back the following year. Markets are down sharply this year, making for a large number of negative performers, unlike 2021.

With the calendar year and tax-loss season approaching an end, my teammate Allan Meyer and I thought we would take a closer look at this years dogs using our investment philosophy focused on safety and value in hopes of identifying opportunities for the new year. This list may also be useful in prompting investors to review their own portfolio for tax-loss selling candidates prior to year-end.

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 is better.

To identify our dogs we looked at companies with a 52-week total return of minus 25 per cent or worse. The list is sorted on this metric from worst to best. (Although this isn’t quite the same as the 2022 calendar return, we view it as a good proxy.)

Our list is limited to dividend payers to keep with the spirit of our philosophy. Dividend yield is the dividend divided by the share price. Debt-to-equity is a safety measure, a lower number is better.

We are value investors, always hunting for a “deal.” Price-to-earnings is the share price divided by the projected earnings per share. It is a valuation metric, the lower the number, the better the value.

All companies on the list are projected to generate earnings. We feel this may make them more likely to experience a comeback. Earnings momentum is the change in annualized earnings over the past quarter. 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

TSX stocks with a 52-week total of minus 25% or worse

CompanyTickerMkt. Cap. ($ Bil.)52W Ttl. Rtn. (%)Div. Yld. (%)Debt/Eqty. (%)P/EEarns. Mom. (%)Recent Close ($)
CI Financial Corp.CIX-T2.6-49.65.1248.64.4-1.813.92
Enghouse Systems Ltd.ENGH-T1.6-43.12.55.619.9-3.129.35
Goeasy Ltd.GSY-T1.9-41.83.1204.98.32.3118.23
Hudbay Minerals Inc.HBM-T1.8-39.60.385.29.4-47.97.09
Canadian Western BankCWB-T2.4-38.64.989.26.8-2.825.85
EQB Inc.EQB-T2.0-38.32.5665.75.9-16.759.39
Premium Brands HoldingsPBH-T3.6-38.13.5110.214.50.880.31
Open Text Corp.OTEX-T10.5-35.23.4104.78.90.638.18
Enerflex Ltd.EFX-T1.1-34.51.228.77.2-346.28.38
Cogeco CommunicationsCCA-T3.4-32.04.2170.27.72.873.16
Kinross Gold Corp.K-T7.1-31.43.025.613.8-6.55.45
Centerra Gold Inc.CG-T1.5-31.24.11.011.6-58.76.73
Pan American Silver Corp.PAAS-T4.2-30.62.71.732.5-38.119.93
Leon's Furniture Ltd.LNF-T1.1-29.84.057.76.43.916.35
FirstService Corp.FSV-T7.3-29.70.781.627.0-4.7168.17
GFL Environmental Inc.GFL-T12.3-28.40.2143.552.9-3.437.06
Colliers Int'l Group Inc.CIGI-T5.2-28.20.3158.012.54.0124.44
SNC-Lavalin Group Inc.SNC-T4.2-28.20.372.714.811.524.00
Cargojet Inc.CJT-T2.3-28.10.858.917.150.6134.85
First Majestic Silver Corp.FR-T3.2-28.10.315.735.2-30.712.25
Innergex Renew. EnergyINE-T3.2-26.34.6464.945.9-250.015.78

Source: Refinitiv Eikon & Wickham Investment Counsel Inc. 

Leon’s Furniture Ltd. LNF-T scores well across the board for safety and value while Canadian Western Bank CWB-T and Open Text Corp. OTEX-T also look interesting. CI Financial Corp. CIX-T, whose stock price has fallen the most in the past 52 weeks, has the highest dividend yield and best value, but the debt loads are high. Centerra Gold Inc. CG-T has the least debt and is among several miners (mainly precious metals) on the list. Cargojet Inc. CJT-T has solid earnings momentum, which could imply a disconnect with the negative price returns. It also looks decent on other metrics. Notably, several companies show negative earnings momentum, a cautionary sign for investors looking for a rebound.

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.