Monthly Archives

July 2019

Number Cruncher Extra – Seeking wealth creators among U.S. consumer discretionary stocks

In this week’s filter created for The Globe and Mail, we screened for wealth creators in the US consumer discretionary sector. We are looking for improving performance and comparing it to the premium or discount the market has attributed to those companies. We screened the S&P 500 Consumer Discretionary stock universe by focusing on the following criteria:

  • Market capitalization above US$10-billion;
  • A current economic performance index (EPI) equal to or greater than one – this ratio is the return on capital to cost of capital. It gives shareholders an idea of how much return the company is generating on each dollar spent;
  • A positive 12-month EPI change – this measures the growth in return on capital versus cost of capital over the past 12 months;
  • A future-growth-value-to-market-value ratio (FGV/MV) between 50 per cent and minus 50 per cent. We chose this range to eliminate stocks that trade at an exaggerated premium or discount as that would increase the risk. This ratio represents the proportion of the market value of the company that is made up of future growth expectations rather than the actual profit generated. The higher the percentage, the higher the baked-in premium for expected growth and the higher the risk.
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Seeking wealth creators among U.S. consumer discretionary stocks

In this week’s filter created for The Globe and Mail, we screened for wealth creators in the US consumer discretionary sector. We are looking for improving performance and comparing it to the premium or discount the market has attributed to those companies. We screened the S&P 500 Consumer Discretionary stock universe by focusing on the following criteria:

  • Market capitalization above US$10-billion;
  • A current economic performance index (EPI) equal to or greater than one – this ratio is the return on capital to cost of capital. It gives shareholders an idea of how much return the company is generating on each dollar spent;
  • A positive 12-month EPI change – this measures the growth in return on capital versus cost of capital over the past 12 months;
  • A future-growth-value-to-market-value ratio (FGV/MV) between 50 per cent and minus 50 per cent. We chose this range to eliminate stocks that trade at an exaggerated premium or discount as that would increase the risk. This ratio represents the proportion of the market value of the company that is made up of future growth expectations rather than the actual profit generated. The higher the percentage, the higher the baked-in premium for expected growth and the higher the risk.

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Canada’s 2019 Top 50 FinTech Companies

The Digital Finance Institute selects Inovestor as one of their 2019 Top 50 FinTech Companies. Inovestor would like recognize everyone involved in making Inovestor a household name in the Fintech industry. As we approached our 20th anniversary, Inovestor is preparing a major product upgrade set for a November 22nd release.

To prepare the list of Canada’s Top 50 FinTech Companies, the Institute conducted market research and informational interviews with stakeholders to gather data to help identify the leading companies in Canada. A number of factors, such as disruption of service, scalability, growth, external adoption and innovation were taken into consideration when compiling the list of the top 50 companies. In assessing the factors, we standardized the ranges of numeric variables and measured each company’s score index by calculating the weighted average under the comprehensive consideration of the determining factors listed above. The companies listed represent a wide diversity of sub-sectors in FinTech, capital markets, insurance, Blockchain, RegTech, payments and finance.

 

The Digital Finance Institute

The Digital Finance Institute is a think tank for digital finance with three foundational pillars – financial inclusion, responsible innovation, and support for women in FinTech. Today, the Institute is run by Millennials, which we believe is important for Canada’s digital economy revolution. In our work, we represent a strategic link in the digital finance ecosystem among the financial services sector. NGO’s, academia, financial regulators and policy makers to promote financial innovation and vibrancy through thought leadership, engagement, advocacy, research and education. That strategic link comes together at APEC 2019, for example, where the institute is invited to give a talk on AI, banking and regulation to the 21 member countries, which helps promote Canadian innovation.

Portfolio Manager Q2 Commentary

The S&P/TSX Composite Total Return Index increased by 2.6% in the second quarter. This adds to the first quarter gains for a YTD return of 16.2%. During Q2, the S&P 500 produced a 4.3% return for a YTD rate of 18.5% and the MSCI ACWI ex USA posted a 3.2%, leading to a 14% YTD total return.

Over the 2nd quarter, the FED has confirmed its dovish stance given that inflation and economic activity is under control. The Chinese economy growth has been decelerating resulting in the slowest GDP growth in the last 27 years. On the other hand, expectation for the Canadian growth rate has been on the rise. Reasons for this growth is the stronger than expected exports, better than expected labor market conditions, and higher than expected housing starts.

Our NQICA index returned 4.6% in Q2 and 16.5% YTD versus the S&P/TSX which returned 2.6% in Q2 and 16.2% YTD. The 1-year return for NQICA is 4.4% versus 3.9% for the S&P/TSX over that same period.

The worst performers in the index were Norbord (OSB), down 11%, and Great-West Lifeco down 5.6%. On the contrary, the best performer was Dollarama (DOL), up 29.4%, followed by CCL Industries (CCL.B), up 19%.

At the end of Q2, NQICA was under weighted in Energy (-13%) and Financials (-4%) and over weighted in Consumer Discretionary (15.5%) and Consumer Staples (4.3%).

The current rebalancing requirements are minimal and are entirely due to the model’s sector weights’ variation. The telecom sector weight increased, and the financial sector weight decreased due to the greater economic value added (EVA) created by Telecom versus Financials. Industrial Alliance (IAG), having the lowest SP Score of our financial holdings, was kicked out of the index. IAG was replaced by Telus (T) which is the highest scored telecom company not already in the model.

Number Cruncher Extra – These 17 Canadian-listed small-cap stocks show solid fundamentals

In this week’s filter created for The Globe and Mail, we screened for Canadian-listed small-cap stocks showing solid fundamentals.

Today we highlight Canadian small-cap growth companies that have sound fundamentals.

We screened the Canadian stock universe by focusing on the following criteria:

  • Market capitalization between $200-million and $1-billion;
  • A current economic performance index (EPI) greater than one – this ratio is the return on capital to cost of capital. It gives shareholders an idea of how much return the company is generating on each dollar spent;
  • Positive 12-month sales growth;
  • A PEG, or price-earnings to growth, ratio between zero and two. This ratio compares the current price-to-earnings ratio with the average five-year earnings per share growth. For a stock to be fairly valued, the PEG ratio is one. For the stock to be undervalued, the PEG ratio would be lower than one, showing that the stock price does not fully reflect the earnings growth capability of the company.

Our Findings:

Magellan Aerospace Corp., an aerospace systems and components manufacturer based in Mississauga, is the largest company on our list by market cap. The PEG ratio is 0.8, which suggests that the earnings growth was stronger than what is reflected by the stock price – in other words, an attractive valuation. On the other hand, the company’s operations are efficient, as indicated by the EPI, which shows return on capital at 1.5 times the cost of capital.

TerraVest Industries Inc., an Alberta-based manufacturer whose products include fuel-containment vessels and wellhead processing equipment for the oil and gas industry, is one of the smallest companies on our list by market cap. It has a PEG ratio is 0.6, putting the stock at an attractive price point. In addition, the sales grew strongly, at 34.6 per cent, over the past 12 months.

This article is written by Noor Hussain, Analyst at Inovestor Inc. 

Investors are advised to do further research before investing in any of the companies that are listed below.

For subscribers to StockPointer, you can select the link below and adjust the screener to your liking.

These 17 Canadian-listed small-cap stocks show solid fundamentals

In this week’s filter created for The Globe and Mail, we screened for Canadian-listed small-cap stocks showing solid fundamentals.

Today we highlight Canadian small-cap growth companies that have sound fundamentals.

We screened the Canadian stock universe by focusing on the following criteria:

  • Market capitalization between $200-million and $1-billion;
  • A current economic performance index (EPI) greater than one – this ratio is the return on capital to cost of capital. It gives shareholders an idea of how much return the company is generating on each dollar spent;
  • Positive 12-month sales growth;
  • A PEG, or price-earnings to growth, ratio between zero and two. This ratio compares the current price-to-earnings ratio with the average five-year earnings per share growth. For a stock to be fairly valued, the PEG ratio is one. For the stock to be undervalued, the PEG ratio would be lower than one, showing that the stock price does not fully reflect the earnings growth capability of the company.

Our Findings:

Magellan Aerospace Corp., an aerospace systems and components manufacturer based in Mississauga, is the largest company on our list by market cap. The PEG ratio is 0.8, which suggests that the earnings growth was stronger than what is reflected by the stock price – in other words, an attractive valuation. On the other hand, the company’s operations are efficient, as indicated by the EPI, which shows return on capital at 1.5 times the cost of capital.

TerraVest Industries Inc., an Alberta-based manufacturer whose products include fuel-containment vessels and wellhead processing equipment for the oil and gas industry, is one of the smallest companies on our list by market cap. It has a PEG ratio is 0.6, putting the stock at an attractive price point. In addition, the sales grew strongly, at 34.6 per cent, over the past 12 months.

This article is written by Noor Hussain, Analyst at Inovestor Inc. 

Investors are advised to do further research before investing in any of the companies that are listed below.

Log in to you account to get additional information or to modify the original screener

StockPointer® Canadian Equities Model Portfolio Transactions – July 2019

We have rebalanced the Nasdaq Inovestor Canadian Index based on our Canadian Model Portfolio, which will be effective on July 19th after market close. Here are the details:

In:

  1. Telus Corporation (T) – Market Trend. Increase in Telecommunication sector as seen in the Top 100 index therefore increasing our position in the portfolio.

Out:

  1. IA Financial Corporation (IAG) – Market Trend. Decrease in the Financial sector as seen in the Top 100 index.

Canadian ETFs: Smaller providers continue to get pushed out of the market

In this research report created this week for The Globe And Mail, we look at Canadian ETFs: June’s launches and terminations.

A new ETF issuer joined the industry during May with a suite of alternative ETFs.

The Canadian ETF industry ended the second quarter with assets under management (AUM) at $181-billion. Despite the booming industry, smaller providers of exchange-traded funds are being forced out of the market owing to increased competition.

The latest example is Galileo Global Equity Advisors Inc., which announced Monday that it will be exiting the industry with the closing – on or about Sept. 9 – of its only ETF, the U.S. Global Go Gold and Precious Metal Miners ETF (GOGO-TSX). “Although the fund has outperformed its peers since its inception [Sept. 29, 2017], the costs associated with maintaining this product in the Canadian marketplace are simply too prohibitive,” Frank Holmes, director of Galileo Global Equity Advisors, said in a news release.

As for notable recent additions, Evolve Funds Group Inc. launched two themed ETFs in June. The Evolve Global Materials & Mining Enhanced Yield Index ETF (BASE-TSX) seeks to replicate the performance of the Solactive Materials & Mining Index, while mitigating downside risk. The ETF invests directly or indirectly in companies engaged in the manufacturing, mining and/or integration of metals and materials, while writing covered call options on up to 33 per cent of the portfolio securities. It is also offered in unhedged units under the ticker BASE.B.

Evolve also introduced Canada’s first e-gaming ETF last month. The Evolve E-Gaming Index ETF (HERO-TSX) seeks to replicate the performance of the Solactive Electronic Gaming Index, designed to provide investors with access to companies listed domestically and globally that have business activities in the electronic gaming industry. The momentum behind e-gaming “signifies a cultural shift in entertainment with 2.2 billion gamers globally. … This year, the industry is forecast for growth upwards of 38 per cent,” Raj Lala, president and CEO of Evolve Funds Group Inc., said in a June news release.

Find the full report here

This article is written by Kimberly Yip Woon Sun,  ETF Analyst at Inovestor Inc. 

Release Notes 20190705.1

Overview

This post details the changes that went into Production for Inovestor for Advisor on July 5th, 2019.