Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

What are we looking for?

Canadian-listed stocks exhibiting strong price momentum.

The screen

Momentum stock strategies typically display high turnover and high volatility in short time periods. They can also exhibit sketchy fundamentals and may be driven by irrational sentiment in the market. Therefore, they are not for the more risk-averse investor. However, momentum stock strategies can also exhibit dramatic outperformance over the long term. Regardless of the pitfalls, momentum stocks can supplement a well-rounded portfolio or as an additional input into stock selection.

Momentum can sometimes refer to company sales, earnings or analyst estimates. Today, I focus on traditional momentum, which is based on a stock’s price movement. Stocks are ranked from the current CPMS Canadian universe of 707 stocks and are based on the following factors:

Story continues below advertisement

  • Three-month price change;
  • Six-month price change;
  • 12-month price change.

Additionally, stocks are only included when they have at least a $500-million market capitalization and a positive three-month price change.

More about Morningstar

Morningstar Research 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.

What we found

I used CPMS to back-test the strategy over two decades, from January, 2000, to December, 2020. During this process, a maximum of 20 Canadian stocks were purchased and equally weighted at the start of each quarter, with a maximum of five stocks for each sector to prevent overexposure to one sector. Stocks would be sold before the next quarter only if their rank dropped below the 40th percentile in the CPMS Canadian universe, otherwise they would be held for the entire quarter.

Over this period, the strategy produced an annualized total return of 18.6 per cent, while the S&P/TSX Composite Total Return Index advanced 6.2 per cent. Although the strategy produced dramatic outperformance, there are some caveats to be aware of. Standard deviation, a measure of volatility, was 21.6 per cent for the strategy, while the benchmark measured 14.1 per cent. Strategy turnover was also high, at 290 per cent, meaning stocks were changed almost three times each year. However, accounting for the potential of large outperformance, momentum strategies can be a worthwhile consideration for investors with higher risk tolerance. Today, 20 stocks qualify for purchase into the strategy and are listed in the accompanying table.

As always, investors are encouraged to conduct their own independent research before purchasing any of the investments listed here.

Select Canadian-listed momentum stocks

RankCompanyTickerSectorMkt. Cap. ($ Mil.)3M Price Chg. (%)6M Price Chg. (%)12M Price Chg. (%)Recent Close ($)
1AcuityAds Holdings Inc.AT-TComm. Svcs.864.9263.2795.11,006.816.38
2Hive BlockchainHIVE-XFinancials985.2458.8487.61,528.62.85
3Hut 8 Mining Corp.HUT-TFinancials691.3385.0426.5377.56.16
4Score Media and GamingSCR-TComm. Svcs.1,266.1317.1311.3300.02.92
5Enthusiast GamingEGLX-TComm. Svcs.557.8255.9242.4186.25.41
6Galaxy Digital HoldingGLXY-TFinancials883.6134.0260.7842.310.46
7Westport Fuel SystemsWPRT-TIndustrials1,192.3268.6314.3155.98.70
8Converge TechnologyCTS-XInfo. Tech.983.0124.6304.5320.76.31
9Lithium Americas Corp.LAC-TMaterials2,752.4103.2216.5425.426.11
10Aphria Inc.APHA-THealth Care5,010.9164.1147.6155.615.82
11Xebec Adsorption Inc.XBC-TIndustrials1,688.7115.7151.4283.111.11
12Energy Fuels Inc.EFR-TEnergy680.9153.5121.4166.85.07
13Maxar Technologies MAXR-TIndustrials3,786.680.5161.2193.362.00
14Capstone Mining Corp.CS-TMaterials1,143.270.1167.9300.02.84
15Headwater ExplorationHWX-TEnergy567.6127.3132.8132.82.91
16Ballard Power Systems BLDP-TIndustrials11,061.899.7106.2201.239.24
17Village Farms Int'lVFF-TCons. Staples1,066.2162.098.0124.816.14
18NanoXplore Inc.GRA-XMaterials655.967.5189.7149.44.49
19Stelco Holdings Inc.STLC-TMaterials2,100.762.6206.7139.723.68
20Hexo Corp.HEXO-THealth Care1,122.7183.6152.538.49.19

Source: Morningstar CPMS 

Note: Only one stock on this list, MAXR, pays a dividend; it currently yields 0.1%.

Michael Pe, CFA, is a product manager for CPMS at Morningstar Research Inc.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies