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Spring is in the air, which means it’s time for love and vegetable gardening. Plant a few seeds, add some patient tending and you might benefit from a bountiful harvest in the fall.

The season also marks the renewal of the Report on Business Magazine’s Top 1000 list of the largest companies in Canada. It provides a bevy of facts and figures on each company and includes a star system that ranks the largest firms on their attractiveness as potential investments. A select group of 20 stocks with the best prospects makes it to the very top and into this year’s megastar team.

As the man behind the star system, I’m pleased to say that last year’s megastar stocks gained an average of 16.2 per cent, including reinvested dividends. By way of comparison, the Canadian stock market – as represented by the S&P/TSX Composite Total Return Index – climbed just 2.6 per cent over the same period. The megastars handily beat the market.

The bountiful returns represent a good start for the star system, which made its debut last year. But it’s useful to remember that investors should focus on the very long term. A good year is grand, but we fully expect to encounter both good and bad periods over the course of time as the market goes through its own boom and bust seasons.

That said, we believe that our system has the ingredients necessary for long-term success. It’s based entirely on the numbers and merges two classic schools of investing. Simply put, it focuses on bargain stocks that the market has taken a fancy to. Seasoned investors will recognize the combination as value stocks with positive momentum.

On the value front, we like stocks that trade at low prices relative to their earnings, cash flows and sales. Throw in a nice dividend yield and a hefty share buyback and we’re even happier. Our momentum measures seek stocks with good relative returns over the last year because history shows that stocks in an uptrend generally continue to perform well.

You can read all about the system in this month’s ROB magazine, which will be distributed to newspaper subscribers on Friday. Or you can head online to where you’ll find the full Top 1000 list. It includes this year’s crop of megastars along with details on everything from how the performance figures were calculated to a wealth of data on each of the largest 1,000 stocks in the land. But before you go, here’s a peek at a couple of this year’s returning megastar stocks.

Air Canada (AC) was the best performing megastar from last year and it made the grade again. It climbed 68 per cent in its first outing and we hope for more to come. The company runs the largest airline in Canada from its headquarters in Montreal and flies customers to more than 200 destinations on six continents. It’s a bargain at three times earnings. Even Warren Buffett, a noted airline-skeptic, had a change of heart and was recently spotted buying a basket of U.S. airline stocks. With a little luck, Air Canada will continue to be a good pick for Canadian investors.

Canfor (CFP) returned to the megastar list this year after providing a total return of 64 per cent. The Vancouver-based company produces lumber and value-added finishing products, while its subsidiary Canfor Pulp (CFX) produces pulp and paper products. Canfor is a relative bargain at nine times earnings and the firm cut its share count by 3 per cent over the past year.

Both companies provide a sense of what we’re looking for. They’re relative bargains with low ratios that the market has taken a real shining to. We’ll be patiently watching them over the next year and hope they’ll continue to grow.

Norman Rothery, PhD, CFA, is the founder of