Stingy Investor The Rothery Report
  Home | Articles | Screens | Tools | Links | SNW | Rothery Report
 
MoneySaver Articles
 2 Graham Stocks for 2017
 3 Stingy Stocks for 2016
 5 Graham Stocks for 2016
 3 Stingy Stocks for 2015
 3 Graham Stocks for 2015
 3 Stingy Stocks for 2014
 4 Graham Stocks for 2014
 8 Stingy Stocks for 2013
 6 Graham Stocks for 2013
 9 Stingy Stocks for 2012
 8 Graham Stocks for 2012
 Simple Way 2011
 5 Stingy Stocks for 2011
 7 Graham Stocks for 2011
 Simple Way 2010
 5 Stingy Stocks for 2010
 8 Graham Stocks for 2010
 Simple Way 2009
 Timing Temptation
 19 Stingy Stocks for 2009
 4 Graham Stocks for 2009
 Simple Way 2008
 Active at Passive Prices
 Unbundling ETFs 2008
 5 Stingy Stocks for 2008
 5 Graham Stocks for 2008
 Is your index too active?
 Graham's Simple Way
 Canadian Graham Stocks
 5 Stingy Stocks for 2007
 8 Graham Stocks for 2007
 Top SPPs
 The Simple Way
 A hole in your IPO?
 Monkey Business
 8 Stingy Stocks for 2006
 Graham Stock Gainers
 Blue-Chip Blues
 Are Dividends Safe?
 SPPs for 2005
 Graham's Simplest Way
 Selling Graham Stocks
 RRSP Money Market Funds
 Stingy Stocks for 2005
 High Performance Graham
 Intelligent Indexing
 Unbundling Canadian ETFs
 A history of yield
 A Dynamic Duo
 Canadian Graham Stock
 Dividends at Risk
 Thrifty Value Stocks
 Stocks in Short Supply
 The New Dividend
 Hunting Goodwill
 SPPs for 2003
 RRSP: don't panic
 Desirable Dividends
 Stingy Selections 2003
 10 Graham Picks
 Growth Eh?
 Timing Disaster
 Dangerous Diversification
 The Coffee Can Portfolio
 Down with the dogs
 Stingy Selections
 Frugal Funds
 Graham Revisited
 Just Spend It
 Ticker Temptation
 Stock Mortality
 Focus on Fees
 SPPs for the Long Term
 Seeking Solid Stocks
 Relative Strength
 The VR Approach
 The Irrational Investor
 Value Investing
 Eye on PI

MoneySense Articles
 Cdn Top 200 2016
 US Top 500 2016
 Retirement 100: 2015
 Cdn Top 200 2015
 US Top 500 2015
 Retirement 100: 2014
 Cdn Top 200 2014
 US Top 500 2014
 Retirement 100: 2013
 Cdn Top 200 2013
 US Top 500 2013
 Retirement 100: 2012
 Buffett Buys
 FB IPO
 Stocks that pay
 Value in the S&P500
 Cdn Top 200 2012
 US Top 500 2012
 Retirement 100: 2011
 Where to invest $100k
 Where to invest $10k
 Summer Simple Way
 A crystal ball for stocks?
 Cheap & safe
 Risky business
 Cdn Top 200 2011
 US Top 500 2011
 Retirement 100
 Dividend investing
 Value investing
 Momentum investing
 Low P/E P/B
 Dividends
 Dividend growers
 Cdn Top 200 2010
 US Top 500 2010
 Graham's prescription
 Income 100: 2009
 The case for optimism
 Cdn Top 200 2009
 U.S. Top 500 2009
 Wicked investments
 Simply spectacular
 Income 2008
 Small stocks, big profits
 Cdn Top 200 2008
 US Top 500 2008
 Value that sizzles
 So simple it works
 Income 100
 No assembly required
 Investing by the book
 Cdn Top 200 2007
 US Top 500 2007
 Invest like the masters
 A simple way to get rich
 Top Trusts 2006
 Stocks for cannibals
 Car bites dogs
 Cdn Top 200 2006
 US Top 1000 2006
 So easy, so profitable
 Top Trusts 2005
 Dogs of the Dow
 Top 200 2005
 Money for nothing
 Yield of dreams
 Return of the master

Globe & Mail Articles
 Indexing advice
 Media-shy stocks
 Curse of size
 Market uncertainty
 Be even lazier
 Scary beats safe
 Small, illiquid, value
 Use the numbers
 What value is good value?
 Sculpt for value
 Value vs CAPE
 Graham Rules
 CAPE vs PeakE
 Top value ratio
 Low Beta
 Value and dividends
 Walter Schloss
 Try unloved AIG
 Why I'm a value investor
 New world of ETFs
 Low P/Es possible
 10 yielders
 Be happier
 Long-Short
 Dividend Downside
 Shiller's P/E
 Copycat investing
 Cashing in on class
 Index roulette
 Theory collides
 Diving too deep
 3 retirement villains
 Scourge of inflation
 Economic omens
 Analyst Expectations
 Value stock scarcity
 It's all in the index
 How to pick good funds
 Low Beta Wins
 Hunt for dividend stocks
 Think garage sale

Advisor's Edge Articles
 Passive Rebundling
 Doing the math

Norm Speaks
Flip Books



The Top 200 Canadian Stocks for 2015

The holidays can be a tough time for those who agonize over decisions. You have to choose the right wine for Christmas dinner, the right tree for the living room, and just the right gift for Mrs. Wright who teaches arithmetic to Junior. Picking the right stocks for your portfolio can be even more taxing. If you make the wrong choice here, the fallout could be far greater than dealing with a disappointed math teacher.

That's why we're pleased to offer a helping hand with the 11th annual MoneySense Top 200 guide to Canadian stocks. It's packed with the information professional investors like to consider, as well as an easy-to-use grading system for less seasoned investors.

Unlike other stock-picking systems, ours has a full decade of stellar, easily verified performance behind it. Our annual All-Star stock picks, which combine the best growth and value characteristics, have climbed by an average of 17.3% a year since we started 10 years ago. That assumes an equal dollar amount was put into each All-Star stock in first year and rolled into the new All-Stars each year thereafter. By way of comparison, the S&P/TSX Composite (as represented by the XIC ETF) advanced by just 5.3% annually over the same period. The All-Stars beat the market by an average of 12.0 percentage points per year over the last decade.

The graphs below convert those percentages into more easily understandable dollar terms. If you had split $100,000 equally among the original All-Stars 10 years ago and moved into the new stocks each year, your portfolio would now be worth approximately $492,000 - almost five times your original investment.


However, those wonderful average gains came with a few disappointments along the way. For instance, the All-Stars lost almost 33% from November 2007 to November 2008. They also trailed the market in three of the last 10 annual periods.

As it happens, this past year has been one of the disappointing ones. While the All-Star stocks climbed 2.3% since last time, they trailed the S&P/TSX Composite ETF, which gained 9.3%. (The return figures shown above do not include dividends.)

We'd love to be able to say such disappointments are a thing of the past, but seasoned investors know that every stockpicking method runs into difficulty from time to time. We fully expect the All-Stars to lag the market, or even lose money, on occasion. In addition, some individual stocks inevitably go sour. While we do our best to avoid such situations, it's just not possible to take the market's gains without experiencing its downside now and then.

The Top 200 examines Canada's largest 200 companies (by revenue) using data from Bloomberg. Each firm is graded in two very different ways. First we consider its attractiveness as a value investment and then we determine its appeal as a growth investment.

Our value and growth tests employ sophisticated calculations that are based strictly on the numbers. Our feelings or intuitions about a company don't enter into it. But we sum up everything about a stock in easy-to-understand grades - one for value and the other for growth.

The grades work just like they did when you were in school. Top stocks get As. Solid firms are awarded with Bs or Cs. Those that don't measure up get Ds or even Fs. Stocks with good grades are deemed to be worthy of consideration while those at the bottom of the class should be treated with caution.

The select group of stocks that get at least one A and one B on the value and growth tests make it into the All-Star list. Before we talk about them, let's walk through the grading process.

How to measure value

Value investors like solid stocks selling at low prices. That's why we look for companies with low price-to-book-value (P/B) ratios. This ratio compares a firm's market value to the amount of money that could be raised by selling off its assets (at their balance-sheet values) and paying off its debts. A low P/B ratio provides some assurance that you're not paying much more for a company than its parts are probably worth. To get top marks for value, a stock must possess a low P/B ratio compared to the market and also compared to its peers within the same industry.

We also track price-to-tangible-book-value ratios. Tangible book value is like regular book value, but ignores intangible assets like goodwill. It's an even sterner test of how much a company would be worth if it had to be sold off for scrap.

Assets are one thing, but it's also important to investigate each company's bottom line. We prefer profitable companies and award higher grades to firms with positive price-to-earnings (P/E) ratios (based on their earnings over the past 12 months). We also reward a company if industry analysts expect it to be profitable and have a positive P/E over the next year. (This number is known as the forward P/E ratio.)

Because we know investors enjoy getting some spending money, we award extra marks to firms that pay dividends. As it happens, dividend-payers generally outperform the miserly firms that don't pay dividends.

For safety's sake we also want to make sure a company hasn't loaded up on debt. That's why we award better grades to firms with low leverage ratios (defined as the ratio of assets to stockholders' equity) relative to their peers.

We combine these factors into a single value grade. Only 20 out of 200 stocks got an A this year.

Value Team
BONAVISTA ENERGY (BNP)
CANAM GROUP (CAM)
CAPITAL POWER (CPX)
CENTERRA GOLD (CG)
CERVUS EQUIPMENT (CVL)
DOREL INDUSTRIES (DII.B)
E-L FINANCIAL (ELF)
EMPIRE CO (EMP.A)
ENSIGN ENERGY SERVICES (ESI)
FAIRFAX FINANCIAL (FFH)
FIRST QUANTUM MINERALS (FM)
GENWORTH MI CANADA (MIC)
INDUSTRIAL ALLIANCE (IAG)
MAPLE LEAF FOODS (MFI)
POWER CORP OF CANADA (POW)
RONA (RON)
SAVANNA ENERGY SERVICES (SVY)
STUART OLSON (SOX)
TRINIDAD DRILLING (TDG)
UNI-SELECT (UNS)


Grading for growth

Growing firms tend to be healthier than those in decline. That's why we award higher marks to any company that has achieved reasonable earnings-per-share and sales-per-share growth over the last three years. We also track each firm's growth in total assets over the last year to get a sense of the momentum in its business.

While fundamental growth is great, we also like it when the market takes notice. That's why we give higher marks to stocks with solid returns over the past year.

In addition, we want to make sure that companies use their capital wisely. So we scrutinize each stock's return on equity, which measures how much a firm is earning compared to the amount shareholders have invested. Return on equity is a measure of business quality and we give high marks to those firms which outperform their peers.

Since no one wants to buy an overly inflated stock, we weigh up each stock's price-to-sales ratio, which as you might expect, compares its price to its sales. We figure stocks with low-to-moderate ratios are reasonably priced while those with sky-high ratios could suddenly fall back to earth.

We put these factors together to determine each stock's growth grade. Only 20 out of the 200 got an A this year.

Growth Team
AGT FOOD & INGREDIENTS (AGT)
ALIMENTATION COUCHE-TARD (ATD.B)
AUTOCANADA (ACQ)
CANADIAN TIRE (CTC.A)
CCL INDUSTRIES (CCL.B)
COGECO (CGO)
COGECO CABLE (CCA)
FAIRFAX FINANCIAL (FFH)
FINNING INTERNATIONAL (FTT)
LASSONDE INDUSTRIES (LAS.A)
LINAMAR (LNR)
MAGNA INTERNATIONAL (MG)
METRO (MRU)
PARKLAND FUEL (PKI)
SAPUTO (SAP)
SECURE ENERGY SERVICES (SES)
WEST FRASER TIMBER (WFT)
WESTERN FOREST PRODUCTS (WEF)
WESTJET AIRLINES (WJA)
YELLOW MEDIA (Y)


The All-Star stocks

Nine stocks made it into the All-Star list this year by earning at least one A and one B on our value and growth tests.

Two of this year's top stocks, Cervus Equipment (CVL) and WestJet Airlines (WJA), were also in the All-Star team last year. Cervus runs the largest group of John Deere dealerships in Canada and has a presence in the commercial, industrial and equipment sectors. WestJet is well-known as one of the larger airlines in Canada.

Fairfax Financial (FFH) is the only stock to get both an A for value and an A for growth. It's a sprawling insurance-focused conglomerate run by noted value investor Prem Watsa from its headquarters in Toronto. Much like Warren Buffett's Berkshire Hathaway (BRK.A), the firm has added noninsurance companies to its family of companies in recent times. (I own both stocks.)

The other All-Stars with the best value grades are Capital Power (CPX) and Maple Leaf Foods (MFI). Those on the growth roster are Canadian Tire (CTC.A), CCL Industries (CCL.B), Cogeco (CGO), and Western Forest Products (WEF).

All-Star list
CANADIAN TIRE (CTC.A)
CAPITAL POWER (CPX)
CCL INDUSTRIES (CCL.B)
CERVUS EQUIPMENT (CVL)
COGECO (CGO)
FAIRFAX FINANCIAL (FFH)
MAPLE LEAF FOODS (MFI)
WESTERN FOREST PRODUCTS (WEF)
WESTJET AIRLINES (WJA)


Before rushing out to buy any stock, do your own due diligence. Make sure its situation hasn't changed in some important way. Read the latest press releases and regulatory filings. Scan newspaper stories to make sure you're up to speed and be careful when buying or selling stocks that trade infrequently. If you take these important steps, you'll be a more comfortable - and successful - investor for years to come.



     + Download the Top 200 (.xls file)



First published in the December/January 2015 edition of MoneySense magazine.

Added:

Performance
YearCapital gain
2005-2006+57.6%
2006-2007+37.6%
2007-2008+16.2%
2008-2009-32.9%
2009-2010+41.0%
2010-2011+19.7%
2011-2012-4.2%
2012-2013+13.4%
2013-2014+55.0%
2014-2015+2.3%


 
Discover top U.S. and Canadian value stocks in
The Rothery Report
About Legal Contact Us
Disclaimers: Consult with a qualified investment adviser before trading. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. More...