Monthly Archives

February 2021

ESG Analytics

Inovestor partnered with Sustainalytics, the largest pure-play investment research and ratings firm dedicated to responsible investment and ESG research, with over 25 years of experience in ESG and corporate governance.

This new add-on provides a mix of quantitative and qualitative ESG content and tools to help you integrate ESG factors in your portfolio and identify potential risks of companies.

To start your ESG analytics trial on over 12,000 companies worldwide, click here or contact your account executive.

 

The Sustainalytics company-level ESG Risk Score measures the degree to which a company’ s economic value may be at risk driven by materially relevant ESG factors. The ESG Risk Score is based on a two-dimensional materiality framework that measures a company’s exposure to sub-industry specific material risks and how well a company is managing those risks. ESG Risk Scores are categorized across five risk levels: negligible, low, medium, high and severe. The scale is from 0–100, with 100 being the most severe.
This data point measures the degree to which a company is exposed to risk driven by environment, social or governance issues. The methodology was developed by Sustainalytics in the Fall of 2018 and captures the total exposure of a company’s economic value to ESG risk. This ESG risk is then broken down into various parts: unmanageable, manageable, managed and unmanaged. The unmanaged portion is the Sustainalytics ESG Risk Rating.
Under Sustainalytics methodology, at the company level, this data point represents the portion of ESG risk that a company manages through its policies, programs, management systems etc. The remainder of the manageable risk is called Management gap.
Company Environmental Risk Scores from Sustainalytics measure the degree to which a company’s economic value may be at risk driven by environmental factors. The environmental risk represents the unmanaged environmental risk exposure after taking into account a company’s managment of such risks. The Environmental Risk Scores are displayed as a number between 0 and 100, though most scores range between 0 and 25.
Company Social Risk Scores from Sustainalytics measure the degree to which a company’s economic value may be at risk driven by social factors. The social risk represents the unmanaged social risk exposure after taking into account a company’s management of such risks. The Social Risk Scores are displayed as a number between 0 and 100, though most scores range between 0 and 25.
Company Governance Risk Scores from Sustainalytics measure the degree to which a company’s economic value may be at risk driven by governance factors. The governance risk represents the unmanaged governance risk exposure after taking into account a company’s management of such risks. The Governance Risk Scores are displayed as a number between 0 and 100, though most scores range between 0 and 25.
Name of the top 3 material ESG issues considered by an analyst to be high priority and has a company-specific, analyst written analysis in the ESG Risk Rating report.
Sustainalytics provides an assessment of controversies using news screens of over 60,000 sources. A news report of an issuer’s alleged or actual misconduct is assessed to determine stakeholder impact and reputation risk within 48 hours of the event. Sustainalytics evaluates 10 different topic areas on a rating scale from 0–5 where 5 is the most severe.
Sustainalytics product involvement data points identify the nature and extent of a company’s involvement in a range of product and business activities for screening purposes.
ESG Analytics has also been added to the My Portfolios module. You can assess the overall ESG risks of your portfolio and identify the elements pertaining to these risks, whether it is due to environment, social or governance factors.

Click here to add ESG analytics to your account.

Number Cruncher Extra – Stingray Group, Savaria Corporation & Investors Title Company

In our last Number Cruncher we discussed how Stingray Group (RAY.A), Savaria Corporation (SIS) & Investors Title Company (ITIC) could be good candidates to take advantage of the economic recovery. Now, we’re going to look at these stocks with Stockpointer.

Let’s start with RAY.A

 

The company has a high score of 68 in our system. The outlook increased by 10 in the last 90 days showing a strong improvement in the fundamentals. The company increased its sales by 31.5% in the last 5-year period, but had to compromise on its EPS to fuel this growth. The performance spread, the return on capital minus the cost of capital, declined recently due to the pandemic.

The company scores well in various factors compared to peers. It has the second highest overall score based on this metric.

SIS has a similar growthj profile than RAY-A, but it also provided decent EPS growth in the last 5-year. It has a solid score of 59 SP score which is fueled by its strong performance, but with a moderate risk. Our system evaluates SIS to be a quality and growth company while being a bad value based on our Price/Intrinsic value metric as well as other well-known metrics.

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SIS’s return on capital reached 19% in 2017 and 2018, but the economic downturn has hurt the company. If the company could reach the 2017-2018 level again, shareholders could enjoy a incredible price increase.

ITIC has a incredible score of 71 while being identified as a growth and quality. All metrics are positive as the performance score is high, the risk score is low, the sales and EPS growth are highly positive. The company also managed to increase its performance spread. There is nothing negative around here.

As shown by the intrinsic value calculated by our software, the company achieved an impressive performance between 2017 and 2018. The stock experience negative momentum since 2018, but the trend seems to be reversing as the share price seems to converge towards its intrinsic value.

If you have any questions about the article, feel free to contact Anthony :
Amenard@Inovestor.com

If you would like to sign up for a free trial and learn how Inovestor can benefit you, contact Olivier:
Olamothe@Inovestor.com

 

Small caps poised for growth in a post-pandemic world

What are we looking for?

Small caps with solid fundamentals.

We believe small capitalization stocks, generally seen as more risky than large caps, will also be more likely than large caps to take advantage of renewed economic activity as the pandemic recedes in the months ahead.

The screen (access and save it on the Inovestor for Advisors platform)

We screened North American stocks focusing on the following criteria:

  • Market capitalization between $250-million and $1-billion;
  • StockPointer (SP) performance score of 75 or higher. The score mainly considers risk-adjusted return on capital, earnings per share growth and free cash flow per share. The score varies between zero and 100;
  • Sales growth higher than 4 per cent over 24 months – we are looking for a company that can grow at a reasonable rate;
  • One-year return lower than 50 per cent – we are trying to eliminate companies with too much short-term price? momentum as they could be subject to mean reversion, that is, eventually revert to their long-term average levels.

For informational purposes, we have also included the recent stock price, price-to-earning ratio, one-year earnings per share growth and dividend yield. Please note that some ratios may be shown as of end of previous quarter.

More about Inovestor

Inovestor for Advisors is a fundamental-analysis research platform specializing in the economic value-added (EVA) approach. With Inovestor, advisors can quickly identify attractive investment opportunities, outsource their stock picking by using model portfolios, and easily communicate investment decisions with clients through client-friendly reports. In addition, Inovestor allows users to create personalized filters, build custom portfolios and carry out in-depth analysis on more than 13,000 companies (Canadian and U.S. stocks and American depositary receipts).

What we found

 

TICKER NAME PRICE MKT. CAP ($MIL) SP PERF. SCORE 24M SALES GRTH. (%) 1Y PRICE RTN. (%) P/E 1Y EPS GRTH. (%) DIV. YIELD (%)
RAY-A-T Stingray Group, Inc. 7.09 520 82.1 48.9 17.8 20.9 -3.6 4.2
SIS-T Savaria Corporation 16.74 855 79.9 45.8 30.8 30.4 18.9 2.9
ITIC-Q Investors Title Company 163.77 310 79.4 51.3 -4.8 7.9 25.0 1.1
HIFS-Q Hingham Institution For Savi 245.00 516 78.0 23.3 27.3 11.9 30.2 0.8
FMNB-Q Farmers National Banc Corp. 13.83 390 77.9 27.5 -13.0 9.4 14.8 3.2
CSW-A-T Corby Spirit And Wine Limite 16.80 477 77.4 4.8 -0.8 15.3 16.6 5.0
RBNC-Q Reliant Bancorp Inc 21.77 355 77.0 91.0 0.1 10.9 39.2 2.2
AGM-N Federal Agricultural Mortgag 83.11 872 75.9 4.6 16.4 10.1 5.2 3.9
CCBG-Q Capital City Bank Group, Inc 24.50 411 75.8 42.1 -13.7 12.7 2.4 2.5
BFC-Q Bank First Corp 69.10 533 75.3 42.1 9.4 15.0 30.6 1.2
TVK-T Terravest Industries, Inc. 17.55 324 75.0 4.2 6.4 10.3 32.7 2.3

*Market cap and recent stock price figures are in native currency.

Music service provider Stingray Group Inc., based in Montreal, has the highest SP performance score of our list. Sales increased vigorously in the last two years partly because of a series of acquisitions. The stock price rose moderately in the last year as the broadcasting and commercial music segment held out, but the radio segment (mostly ads), which counts for 50 per cent of Stingray’s total revenues, fell 40 per cent on a nine-month basis. The company managed to protect its earnings per share despite this bleak time. As radio commercials and social activities return more to pre-pandemic levels, we expect investors to positively re-evaluate the company.

Laval, QC.-based, Savaria Corp., an accessibility and patient handling company, has increased its sales by 45.8 per cent in the past two years, thanks largely to the acquisition of Garaventa Lift, an elevator company. With the pandemic spotlight on long-term care and retirement residences, older people may be more inclined to consider adapting their house to their reality rather than move, which would benefit Savaria. The company announced on Feb. 4 it had acquired Swedish-listed Handicare Group AB, another patient handling company, to reinforce their already well-positioned business in this industry.


Investors Title Co.,
a title insurance provider headquartered in Chapel Hill, N.C., trades at a modest price earnings ratio of 7.9. The company has profited from the booming U.S. residential real estate market over the past two years, achieving 51.3 per cent higher sales over that period, and 25 per cent higher EPS in the past year. If teleworking persists, the strong residential market could very well remain. Despite impressive results, the market appears to be particularly cautious: The company’s stock still trades about 20 per cent below its all-time high of US$204, reached in March, 2018.

Anthony Ménard is an investment analyst at Inovestor Asset Management.

For more details about these stocks, subscribe to the Inovestor for Advisors platform for free: inovestor.com/en-CA/store/

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Canadian ETFs: January’s Launches and Terminations

The Canadian ETF industry reached $260 billion in assets under management at the end of January. The Canadian ETF product line-up continues to expand. New solutions consist mostly of thematic ETFs to cater to changing investor needs.

In the ESG space, Harvest ETF and BMO both launched a clean energy ETF. The Harvest Clean Energy ETF (HCLN-T) invests in a portfolio of the 40 largest Clean Energy Issuers selected from the Clean Energy Investable Universe that are listed on select North American, European and developed Asian stock exchanges and are categorized as renewable energy or renewable energy generation. The BMO Clean Energy Index ETF (ZCLN-T) seeks to replicate the performance of the S&P Global Clean Energy Index, net of expenses. The S&P Global Clean Energy Index is based on the S&P Global Broad Market Index, which includes large, mid and small capitalization companies across developed and emerging markets. The Index aims to capture the performance of companies whose primary business is clean energy, by way of clean energy production or clean energy equipment & technology.

Evolve ETFs introduced Canada’s first Cloud Computing ETF. The Evolve Cloud Computing Index Fund (DATA-T) focuses companies that are directly involved in the cloud computing industry in developed markets. Cloud computing is a technology which allows users to take advantage of computing services, storage space, and processing power through the internet, without the need for their own hardware and software. The global pandemic has increased digitization and the demand for cloud computing services.

Horizons ETF launched the world’s first psychedelic ETF, Horizons Psychedelic Stock Index ETF (PSYK-NE). It provides exposure to North American publicly-listed life sciences companies focussed on psychedelic medicines, and other companies with business activities in the psychedelics industry. In less than a month since its launch, the ETF already reached approximately $52 million in assets. “We launched the world’s first Cannabis-focused ETF in 2017, the Horizons Marijuana Life Sciences Index ETF (HMMJ-T), and we see many similarities between that industry in 2017 when it was in its infancy to the psychedelics industry now. We see the potential for significant growth from this new sector like what we have witnessed with the Cannabis industry during the last few years.” said Mr. Hawkins, President and CEO of Horizons ETFs. “At Horizons ETFs we strive to be at the forefront of key global transformative investment themes. We believe the opportunities with psychedelics not only provide a compelling investment case, but also the potential to provide life-changing impact for those suffering with mental illness.”

Source: Inovestor Inc.

Portfolio Manager’s February Comment for January Results

The S&P/TSX posted a negative return for the month of January. The outcome took place in an environment where volatility peaked as GameStop (GME) rose rapidly at the end of the month. The S&P/TSX fell mostly at the end of the month, investors were potentially chilled by the speculation.

Last month, The S&P/TSX declined 0.3% while the S&P500 was down 1% and the MSCI ACWI ex USA increased by 0.2%. On an annual basis, the S&P/TSX was up 3.5%, the S&P500 soared 17.2% while the MSCI ex USA rose 14.4%.

The best TSX sector for January was Health Care up 34.8% followed by Utilities up by 2.6% and Information Technology up 1.5%. The worst sectors for the month were Consumer Staples down 4.2%, Materials down 3.5% and Consumer Discretionary down 2.6%.

The NQICAT was up 0.2% in January. On an annual basis, the NQICAT was up 0.7% while the S&P/TSX was up 3.5%.

The NQICAT’s best performers were Transforce (TFII), Richelieu Hardware (RCH) and Telus (T). TFII was up 30.1% due to a favorable reaction from the acquisition of UPS operations. RCH increased by 13.4% due to an excellent quarterly report. T was up 5.9% in the anticipation of the Telus international spin out (TIXT).

The worst performers in the NQICAT were Alimentation Couche-Tard (ATD.B) and Canadian National Railway (CNR). ATD.B dropped 10.1% based on the acquisition of Carrefour which was negatively perceived by investors. CNR fell 7.4% due to a weak outlook given by the management.

2 stocks were sold and bought in the strategy in January. We sold Great-West Lifeco (GWO) because the model recommended a shift from the financial sector to the material sector. It had one of the lowest scores of our financials. GWO has been replaced by CCL Industries (CCL.B) as the company had the highest SP score in the material sector.

We sold Fortis (FTS) because its score had decreased and other players with higher scores were available in the same sector. We replaced it with Hydro One (H) which had the highest score in the utilities sector.

 

StockPointer® Canada Portfolio Transactions – January 2021

We have rebalanced the Nasdaq Inovestor Canadian Index based on our Canadian Model Portfolio, effective today, January 22, after market close.

Here are the details:

Ins:

1. CCL Industries Inc. Class B (CCL.B) - Market trend. Increase in the Material sector as seen in the Top 100 index, therefore, increasing our position in the portfolio.

2. Hydro One (H) - Intra-sectoral transaction. In the top of its sector.

Outs:

1. Great-West Lifeco (GWO) - Market trend. Decrease in the Financial sector as seen in the Top 100 index, therefore, decreasing our position in the portfolio.

2. Fortis (FTS) - Intra-sectoral transaction. No longer in the top of its sector.