All Posts By

Anthony Menard

May 10, 2022
Anthony Menard
In Number Cruncher Extra

Number Cruncher Extra – ONEX Corporation, Quebecor & Manulife

in our last Number Cruncher we discussed how Onex Corporation (ONEX), Quebecor (QBR.B) & Manulife (MFC) could be good candidates if we want to protect our portfolio from an economic downturn.

Here is the screener we used to find these stocks and that you can add to your personalized screeners.

Let’s start with ONEX

The company has a decent SP score of 58 with a 90 days decrease of 3. The SP score is derived from the high performance (55.6) and very low risk (35) score. The company has a high exposure to value (90). Its momentum score is acceptable. The strong increase in its fundamentals in the recent 3 to 12 months  could explain the score even if the share price momentum shows some weakness. Sales and earnings growth are not necessarily relevant for this company given its volatility.

 

We se that the company is a top performer compared to its peers, but is maybe not the best performer for a given risk score.

 

Let’s continue with QBR.B

The company has a robust score of 74 with a stable 90 days score. The SP score is derived from the performance (77.6) and risk (26.9) score. The company has a quality bias with a score of 74. The company achieved moderate five-year sales of 2.5%, but still generated annualized EPS growth of 12.2%.

 

Quebecor has a stable profitability and this chart shows it well. The company not only increased its NOPAT, it also increased its EVA which mean the company didn’t just inflated their numbers, they created value for shareholders. Despite the stable uptrend in the NOPAT and EVA, the share price seems to have lost a bit of momentum which could signal an attractive entry point.

The company has a score of 71 in our system with a stable 90 days score. The SP score is derived from the performance (66.5) and risk (14.8) score. The company has a value bias with a moderate exposure to the yield factor. MFC achieved much lower sales in the last year, down 23.9%, but EPS are up 20.8%. The company registered respectable annualized EPS growth of 45.9% in the last 5 years.

 

MFC seems to trade at a reasonable price and based on our Market value added metrics, we come also to this conclusion. The MVA shows market expectation and see that currently, those are quite low for MFC which suggest that the company could be undervalued based on its historical pricing.

 

 

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

May 10, 2022
Anthony Menard
In Number Cruncher

15 attractively valued TSX stocks with profitability and declining price

What are we looking for?

Before Monday’s sell-off, the S&P/TSX Composite Index generated a return of 6 per cent over the past year, but a chunk of this performance is attributable to the energy sector, which doubled in the same time frame, camouflaging the sluggish performance registered by many non-energy companies.

We will look for companies with positive free cash flow and a declining stock price over the past year to find some that are trading at an attractive price.

The screen (add this screener here)

We screened Canadian stocks focusing on the following criteria:

  • Market capitalization higher than $5-billion;
  • Negative one-year price return – we look for stocks with a lack of positive momentum;
  • Relative Economic Performance Index higher than 0.8 – relative EPI is a multistep calculation that compares the profitability of a company to its valuation and cost of capital. Higher profitability, a lower valuation and a lower cost of capital increase the ratio. Ninety-five per cent of the time the ratio falls between zero and two and is not meaningful below zero, which implies a negative return on capital. A ratio of 0.8 indicates economic performance in the top 20 per cent of the Canadian universe;
  • Positive five-year average free-cash-flow-to-capital – we want companies that generates excess cash flow that they can redistribute to shareholders or pay off debt.

For informational purposes, we have also included the most recent trailing 12 months’ return on capital, price-to-earnings, price-to-book, dividend yield and one-year price return. Please note that some ratios may be as of the 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, advisers 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.

What we found

Profitability, declining price make these 15 TSX stocks look attractively valued

TICKER NAME PRICE MKT VALUE  ($ MIL.) REL. EPI 5Y AVG. FCF / CAP (%) ROC (%) P/E P/B 1Y PRICE RTN. (%) DIV. YLD. (%)
ONEX-T ONEX CORPORATION 74.39 6457 2.17 N/A 11.1 3.7 0.6 -12.4 0.5
QBR-B-T QUEBECOR INC. CLASS B 29.54 7068 1.37 5.6 7.7 12.9 5.6 -13.4 4.1
CTC-A-T CANADIAN TIRE CORPORATION, LIMITED CLASS A 169.45 10192 1.36 6.7 11.9 9.2 2.0 -15.0 3.1
MFC-T MANULIFE FINANCIAL CORPORATION 24.96 48497 1.17 N/A 14.9 7.1 1.0 -3.4 5.3
BHC-T BAUSCH HEALTH COMPANIES INC. 20.69 7436 1.14 2.4 4.5 – 18.7 -42.9 0.0
LUN-T LUNDIN MINING CORPORATION 11.01 8125 1.09 1.6 11.9 6.4 1.4 -25.8 3.3
GWO-T GREAT-WEST LIFECO INC. 33.97 31613 1.06 N/A 14.0 9.9 1.3 -6.3 5.8
IAG-T IA FINANCIAL CORPORATION INC. 66.93 7199 1.00 N/A 13.6 8.7 1.1 -5.5 3.7
BTO-T B2GOLD CORP. 5.56 5864 0.92 8.0 13.4 11.2 1.6 -11.5 3.7
OTEX-T OPEN TEXT CORPORATION 49.36 13304 0.89 5.1 8.5 22.1 2.6 -15.1 2.3
CCL-B-T CCL INDUSTRIES INC. CLASS B 55.26 9957 0.87 7.9 12.0 16.7 2.7 -22.6 1.7
PKI-T PARKLAND CORPORATION 35.06 5405 0.85 6.3 9.3 43.8 2.7 -12.0 0.0
IGM-T IGM FINANCIAL INC. 37.42 8969 0.82 N/A 14.7 9.2 1.4 -16.5 6.0
SLF-T SUN LIFE FINANCIAL INC. 63.68 37316 0.81 N/A 13.7 9.5 1.6 -3.8 4.2
CAR-UN-T CANADIAN APARTMENT PROPERTIES REAL ESTATE INVESTMENT TRUST 47.34 8289 0.81 3.5 6.0 5.9 0.8 -17.2 3.1

Source: Inovestor

Note: Free cash flow is not calculated for financial corporations owing to their structure, so free-cash-flow-to-capital is not available.

Onex Corp., an investment manager involved in credit strategies and private equity, stands out of the list with a relative EPI of 2.17. The nature of its profits is volatile since most of it comes from changes in the fair value of their investments. While the company will record losses from time to time, especially in a stressed environment, investors looking for value may take comfort in its P/E of 3.7 and price-to-book of only 0.6. The company’s stock has fallen more than 25 per cent year-to-date. The company is slated to report its first-quarter earnings on Friday.

Quebecor Inc. has been invited by Rogers Communications Inc. to participate in negotiations to acquire Freedom Mobile from Shaw Communications Inc., according to a Globe and Mail report. The Competition Bureau is seeking to block Rogers’s takeover of Shaw. The acquisition of Shaw’s Freedom would allow Quebecor to follow an earlier expansion plan outside Quebec and could put it in a better position to compete with its telecom rivals. The company will release its first quarter results on Thursday.

Manulife Financial Corp. has a return on capital of 14.9 per cent, the highest of our list, and a juicy dividend of 5.3. The life insurance industry has seen some tough times in the past decade with historically low long-term interest rates, but that could be about to change with the Canadian 10-year bond hitting 3.11 per cent, the highest level since 2011. The company will release its first-quarter results on Wednesday.

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

Anthony Ménard, CFA, is vice-president of data management at Inovestor.

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.

May 2, 2022
Anthony Menard
In Model Portfolio

StockPointer® Canada Portfolio Transactions – April 2022

We have rebalanced the Nasdaq Inovestor Canadian Index based on our Stockpointer® Canada model portfolio. These trades are effective as of Thursday, April 14 after market close. Here are the details of the trades:

Ins:

  1. Brookfield Asset Management (BAM.A) – Market Trend. Increase in the Financial sector as shown by the Top 100 index, therefore, increasing our position in the portfolio. We chose the company because of its high SP score.
  2. Arc Resources (ARX) – Market Trend. Increase in the Energy sector. We chose the company due to its high SP Score.
  3. Intact Financial Corporation (IFC) – Intra-sectorial transaction. In the top of its sector.

Outs:

  1. Metro (MRU) – Market Trend. Decrease in the Consumer Staples sector as shown by the Top 100 index, therefore, decreasing our position in the portfolio.
  2. GDI Integrated Facility Services Inc. (GDI) – Market Trend. Decrease in the Industrial sector.
  3. Power Corporation (POW) – Intra-sectorial transaction. The company is no longer in the top of its sector.
April 12, 2022
Anthony Menard
In Number Cruncher Extra

Number Cruncher Extra – Vector Group Ltd, Philip Morris International Inc, Tyson Foods Inc & Church & Dwight Co. Inc.

in our last Number Cruncher we discussed how Vector Group Ltd (VGR), Philip Morris International Inc (PM), Tyson Foods Inc (TSN) &  Church & Dwight Co. Inc. (CHD) could be good candidates if we want to protect our portfolio from an economic downturn.

Here is the screener we used to find these stocks and that you can add to your personalized screeners.

Let’s start with VGR

The company has a solid SP score of 78 with a 90 days decrease of 3. The SP score is derived from the high performance (75.9) and very low risk (15.6) score. The company has a high exposure to value (74) and quality (68), but low momentum (36) and volatility (37) scores. The company registered a solid past year with a 133.0% growth in earnings, but also a 39% decrease in sales.

 

We see that the company is trading at a discount while it was trading at premium in the past. This could be an interessing buy opportunity.

Let’s continue with PM

The company has a robust score of 78 with a stable 90 days score. The SP score is derived from the performance (77) and risk (20) score. The company has a quality bias with a score of 83. The company achieved healthy five-year sales and EPS growth of 11.6% while stables grew by 2.3%. A more than reasonnable performance given the low P/E valuation.

 

Our system finds PM attractive compared to other similar companies. It is the most perfoming company compared to peers (higher than the Y line) and is considered to be trading at a favourable discount (at the left of the X axis)

The company has a score of 79 in our system with a stable 90 days score. The SP score is derived from the performance (79.1) and risk (19.8) score. The company has a no singificant bias in terms of factor exposure and scores fairly well in all of them. TSN achieved solid 1-year sales growth up 15.6% and earnings growth did follow with an 87.6% increase.

 

As mentionned in the Number Cruncher, the company faced lawsuits in recent years and our ESG scorecard shows that a recent event had a controversy level of 4 out of 5 meaning that it had a meaninful impact on the company.

 

Finally, CHD.

The company has a great score of 71 with a stable 90 days score. The SP score is derived from the performance (79) and risk (31.7) score. The company has a quality bias with a score of 76. The company achieved healthy five-year sales and EPS growth of 4.8% while stables grew by 2.3%. A more than reasonnable performance given the low P/E valuation.

 

We see that the company had a stable ride in the last 5 years and the investors rewarded them well by giving them a generous valuation.

 

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

April 11, 2022
Anthony Menard
In Number Cruncher

17 consumer staples that offer portfolio protection from an economic downturn

What are we looking for?

Consumer staples with a balanced exposure to performance and risk.

The U.S. yield curve inverted at the beginning of April, which is a signal that a U.S. recession could be ahead in the next 12 to 18 months. In addition, inflation in basic needs such as food, housing and energy, combined with higher interest rates, could significantly erode discretionary purchasing power.

We believe that consumer staples is the most likely sector to offer resilience in this environment.

The screen (add this screener here)

We screened U.S. stocks in the consumer staples sector focusing on the following criteria:

  • Market capitalization higher than US$1-billion;
  • StockPointer (SP) performance score higher than 65. 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. A score above 65 implies a well-performing company;
  • StockPointer (SP) risk score lower than 35. The risk score is scaled from zero to 100 where 100 is a high-risk company. 35 is considered low-risk. The score takes into account many criteria; our software looks at leverage and stability of profitability, and uses an automatically calculated discounted cash flow to evaluate the expensiveness of the company;
  • positive five-year earnings-per-share growth. We look for a company that demonstrated improvements over the past five years;
  • SP performance score minus SP risk score, which is how the stocks are ranked.

For informational purposes, we have also included trailing 12 months’ return on capital, price-to-earnings, dividend yield, and one-year price return. Please note that some ratios maybe 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, advisers 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.

What we found

17 staples that offer portfolio protection

TICKER NAME PRICE MKT VALUE  ($ MIL.) SP PERF. SCORE SP RISK SCORE PERF. MINUS RISK 5Y EPS GRTH. (%) ROC (%) P/E 1Y PRICE RTN. (%) DIV. YLD. (%)
VGR-N VECTOR GROUP LTD. 12.22 1881 75.9 15.6 60.3 23.7 20.3 13.2 -15.5 6.6
TSN-N TYSON FOODS, INC. CLASS A 92.44 32859 79.1 19.8 59.3 15.2 13.5 8.7 20.7 2.0
PM-N PHILIP MORRIS INTERNATIONAL INC. 100.07 155126 76.9 19.9 57.1 5.4 26.9 17.2 9.9 5.0
CHD-N CHURCH & DWIGHT CO., INC. 103.45 25091 78.9 31.6 47.3 13.7 16.1 31.2 19.2 1.0
KR-N KROGER CO. 61.67 44834 70.8 24.7 46.1 1.2 8.0 28.4 63.2 1.4
ADM-N ARCHER-DANIELS-MIDLAND COMPANY 95.25 53340 71.6 25.5 46.0 17.1 12.0 19.9 62.7 1.7
CPB-N CAMPBELL SOUP COMPANY 45.47 13732 70.5 24.8 45.7 13.7 11.7 15.0 -5.4 3.3
SFM-Q SPROUTS FARMERS MARKETS, INC. 34.75 3861 68.2 23.0 45.2 20.3 11.5 16.5 33.1 –
COKE-Q COCA-COLA CONSOLIDATED, INC. 488.14 4576 72.9 29.1 43.8 30.3 14.8 24.2 61.0 0.2
PG-N PROCTER & GAMBLE COMPANY 160.1 383770 73.3 32.1 41.2 10.5 15.3 28.3 17.4 2.2
CAG-N CONAGRA BRANDS, INC. 34.5 16570 67.0 26.7 40.3 17.2 7.0 16.0 -4.7 3.6
K-N KELLOGG COMPANY 67.56 23063 68.9 29.5 39.4 17.1 9.4 15.6 7.8 3.4
HRL-N HORMEL FOODS CORPORATION 52.71 28622 69.8 31.4 38.5 0.3 9.6 31.2 13.7 2.0
BG-N BUNGE LIMITED 118.25 16680 70.4 32.0 38.4 23.4 16.3 8.8 48.8 1.8
FLO-N FLOWERS FOODS, INC. 26.54 5610 68.2 30.2 37.9 4.3 9.9 27.4 11.1 3.2
WMT-N WALMART INC. 157.41 434609 69.1 31.6 37.5 2.2 12.8 32.3 12.6 1.4
ANDE-Q ANDERSONS, INC. 54 1828 67.4 30.0 37.4 50.5 8.0 18.3 94.6 1.3

Tobacco manufacturers Vector Group Ltd. and Philip Morris International Inc. rank No. 1 and No. 3 in our performance-minus-risk ranking, at 60.3 and 57.1 respectively.

Vector also ranks first in terms of dividend yield (6.6 per cent), while Philip Morris has the highest return on capital on our list, at 26.9 per cent.

Tobacco stocks have their risks related to regulation as well as ethical or sustainable investing issues, but for those comfortable with them, they offer significant downside protection in case of lower discretionary spending.

Tyson Foods Inc., a processor and marketer of chicken, beef and pork, has the lowest P/E of our screen at 8.7. This low valuation could be explained by the multiple price-fixing lawsuits filed in recent years. However, that didn’t stop Tyson from generating a healthy price return of 20.7 per cent over the past year. The combination of strong performance and a cheap valuation could have potential for defensive investors.

Church & Dwight Co. Inc., well known for its Arm & Hammer home and personal care products, seems a bit expensive with a P/E of 31.2, and a risk score that reflects that higher valuation at 31.6. On the other hand, the company has a solid brand, which is indicated in its financial metrics: the second-highest performance score of our list at 78.9 with an EPS that has increased by a respectable 13.7 per cent over the past five years on an annual basis.

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

Anthony Ménard, CFA, is vice-president of data management at Inovestor.

For more details about these stocks, subscribe to the Inovestor for Advisors platform for free.

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.

March 22, 2022
Anthony Menard
In Number Cruncher Extra

Number Cruncher Extra – West Frazer Timber, Intact Financial Corporation & ARC Ressources

in our last Number Cruncher we discussed how West Frazer Timber (WFG), Intact Financial Corporation (IFC) & ARC Ressources (ARX) perform well in an inflationary environment.

Here is the screener we used to find these stocks and that you can add to your personalized screeners.

Let’s start with WFG

The company has a solid SP score of 76 with a 90 days increase of 3. The SP score is derived from the sky-high performance (96.7) and low risk (30.7) score. The company has a high exposure to value (91) and growth (92). The company registered a solid past year with a 125.4% growth in sales and 199.9% in earnings which could be partially caused by the acquisition of Nordbord (OSB:TSX). WFG has solid long term performance with sales up 36.1% and earnings up 121.3% per year in the last 5 years.

 

By looking at WFG peers, we know that we have a solid company. WFG scores the highest in performance by far and is better than average in terms of risk. By choosing WFG, investors try to enhance the performance profile of their portfolio and not necessarily to lower their risk exposure.

Let’s continue with ENGH

The company has a robust score of 76 with a 90 days decrease of 2. The SP score is derived from the performance (74.1) and risk (19.4) score. The company has a growth bias with a score of 82. The company achieved healthy five-year sales and EPS growth of 19.3% and 25.8% respectively combined with a great short-term performance due to lower claims due to COVID restrictions that limited travelling and transportation.

 

Our system found IFC expensive for few years, but now performance seems to have reached the share price. At the moment, Stockpointer tells us that Intact looks cheap based on its fundamentals.

Finally, ARX.

The company has a score of 70 in our system with a 90 days increase of 4. The SP score is derived from the performance (73.1) and risk (30.5) score. The company has a growth bias with a score of 84 as well as a value bias with a score of 78. ARX achieved incredible 1-year sales growth up 354%. Earnings growth did follow and stand at 1.26 per share on a trailling twelve month basis.

 

Compared to peers, ARC has solid growth and quality factor exposure and has the best average rank in the overall ranking closely followed by Tourmaline Oil Corp (TOU).

 

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

March 22, 2022
Anthony Menard

Number Cruncher Extra – West Frazer Timber, Intact Financial Corporation & ARC Ressources

in our last Number Cruncher we discussed how West Frazer Timber (WFG), Intact Financial Corporation (IFC) & ARC Ressources (ARX) perform well in an inflationary environment.

Here is the screener we used to find these stocks and that you can add to your personalized screeners.

Let’s start with WFG

The company has a solid SP score of 76 with a 90 days increase of 3. The SP score is derived from the sky-high performance (96.7) and low risk (30.7) score. The company has a high exposure to value (91) and growth (92). The company registered a solid past year with a 125.4% growth in sales and 199.9% in earnings which could be partially caused by the acquisition of Nordbord (OSB:TSX). WFG has solid long term performance with sales up 36.1% and earnings up 121.3% per year in the last 5 years.

 

By looking at WFG peers, we know that we have a solid company. WFG scores the highest in performance by far and is better than average in terms of risk. By choosing WFG, investors try to enhance the performance profile of their portfolio and not necessarily to lower their risk exposure.

Let’s continue with ENGH

The company has a robust score of 76 with a 90 days decrease of 2. The SP score is derived from the performance (74.1) and risk (19.4) score. The company has a growth bias with a score of 82. The company achieved healthy five-year sales and EPS growth of 19.3% and 25.8% respectively combined with a great short-term performance due to lower claims due to COVID restrictions that limited travelling and transportation.

 

Our system found IFC expensive for few years, but now performance seems to have reached the share price. At the moment, Stockpointer tells us that Intact looks cheap based on its fundamentals.

Finally, ARX.

The company has a score of 70 in our system with a 90 days increase of 4. The SP score is derived from the performance (73.1) and risk (30.5) score. The company has a growth bias with a score of 84 as well as a value bias with a score of 78. ARX achieved incredible 1-year sales growth up 354%. Earnings growth did follow and stand at 1.26 per share on a trailling twelve month basis.

 

Compared to peers, ARC has solid growth and quality factor exposure and has the best average rank in the overall ranking closely followed by Tourmaline Oil Corp (TOU).

 

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

March 22, 2022
Anthony Menard
In Number Cruncher

13 TSX large cap stocks profiting from higher inflation

What are we looking for?
Large cap stocks that have improved their profitability in an inflationary environment.

With the end of the earnings season, Canadian companies should have reported approximately three fiscal quarters when inflation was higher than 2 per cent, which gives us enough information to properly identify companies that are profiting from higher inflation.

We will focus on companies that increased their return on capital, or ROC, in the past three months and in the past year, as they are likely to continue to deliver solid performance if inflation remains prominent.

ROC is a great metric for comparing the profitability of companies with various degrees of leverage because the metric – unlike return on equity, for example – is unaffected by company leverage.

The screen (add this screener here)

We screened Canadian stocks focusing on the following criteria:

  • Market capitalization higher than $10-billion;
  • Three-month change in ROC – company must have increased its ROC by at least 1 per cent in the past quarter;
  • One-year change in ROC – company must have increased its ROC by at least 3 per cent in the past year;

For informational purposes, we have also included trailing 12-month ROC, five-year average ROC, price-to-earnings, dividend yield, and one-year price return. 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.

What we found

TSX large-cap stocks profiting from rising inflation

TICKER NAME PRICE MKT VALUE  ($ MIL.) 3M ROC CH. (%) 1Y ROC CH. (%) ROC (%) 5Y ROC (%) P/E DIV. YLD. (%) 1Y PRICE RTN. (%)
WFG-T WEST FRASER TIMBER CO. LTD. 124.4 12840 2.4 61.1 83.9 29.8 3.6 1.0 52.8
BAM-A-T BROOKFIELD ASSET MANAGEMENT INC. CLASS A 70.46 115600 4.6 26.4 29.0 16.2 23.3 1.0 24.9
TFII-T TFI INTERNATIONAL INC. 135.15 12430 2.1 12.0 24.3 15.1 15.4 1.0 42.7
IFC-T INTACT FINANCIAL CORPORATION 186.49 32770 3.6 9.9 22.9 13.5 15.0 2.1 23.9
ARX-T ARC RESOURCES LTD. 15.58 10780 9.5 18.0 22.1 8.1 12.4 2.6 106.9
TOU-T TOURMALINE OIL CORP. 50.58 16770 5.7 10.0 17.4 7.7 7.9 1.6 116.5
BIP-UN-T BROOKFIELD INFRASTRUCTURE PARTNERS L.P. 79.03 24125 1.4 5.8 14.5 10.5 33.9 3.6 20.7
OVV-T OVINTIV INC 60.34 12370 5.8 21.6 13.8 5.7 9.0 1.7 98.5
CNQ-T CANADIAN NATURAL RESOURCES LIMITED 76.4 70930 4.2 12.5 13.7 7.9 11.9 3.9 106.3
CVE-T CENOVUS ENERGY INC. 19.29 30450 2.9 16.9 13.0 3.3 71.6 0.7 95.8
NTR-T NUTRIEN LTD. 125.06 68950 3.6 5.8 11.6 7.5* 18.0 1.9 73.5
IMO-T IMPERIAL OIL LIMITED 54.07 36180 7.2 17.3 11.5 4.6 15.6 2.5 82.4
TECK-B-T TECK RESOURCES LIMITED CLASS B 49.11 26310 2.9 6.0 7.0 6.2 9.3 1.0 81.6

*Nutrien’s five-year average return on capital of 7.5% actually reflects a three-year history owing to a merger in 2018.

West Fraser Timber Co. Ltd. has the highest one-year ROC change, most recent ROC and five-year average ROC standing at 61.1 per cent, 83.9 per cent, and 29.8 per cent, respectively. Last Thursday, U.S. housing starts in February once again showed robust numbers, up 22 per cent from the same month last year. Many observers point to chronic underbuilding in Canada and the United States, coupled with robust demand, as favourable to sustainably higher lumber prices.

Casualty and property insurer Intact Financial Corp. reported solid results, but behind others on this list, with a one-year ROC increase of 9.9 per cent. We think Intact may need a bit more time to effectively capture the interest rate tailwind. As rates increase, the bonds that Intact holds provide a higher expected return because of the higher yield. The three-year Canadian bond yield, a proxy for interest income earned by the company, has increased sharply from the start of the year, from 1.02 per cent to 1.9 per cent.

Arc Resources Ltd., an oil and gas company, has the largest increase in ROC in the past three months at 9.5 per cent, and with the increase in oil prices since the last quarter, investors should also expect an impressive quarter ahead.

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

Anthony Ménard, CFA, is vice-president of data management at Inovestor.

For more details about these stocks, subscribe to the Inovestor for Advisors platform for free.

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.

February 1, 2022
Anthony Menard
In Model Portfolio

StockPointer® Canada Portfolio Transactions – January 2022

We have rebalanced the Nasdaq Inovestor Canadian Index based on our Stockpointer® Canada model portfolio. These trades are effective as of Friday, January 21 after market close. Here are the details of the trades:

Ins:

  1. Canadian Pacific Railway (CP) – Market Trend. Increase in the Industrial sector as shown by the Top 100 index, therefore, increasing our position in the portfolio. We chose the company because of its high SP score.
  2. Leon’s Furniture (LNF) – Market Trend. Increase in the Consumer Discretionary sector. We chose the company due to its high SP Score.
  3. Labrador Iron Ore Royalty Corporation (LIF) – Intra-sectorial transaction. In the top of its sector.

Outs:

  1. Winpak (WPK) – Market Trend. Decrease in the Material sector as shown by the Top 100 index, decreasing our position in the portfolio. The company had the lowerst SP score and EPI of this sector.
  2. CCL Industries (CCL.B) – Market Trend. Decrease in the Material sector. The company had the second lowest SP score, the lowest score was Canfor. We decided to sell CCL over Canfor because we think Canfor’s outlook is significantly better than CCL.B, an element that the SP does not consider.
  3. Kirkland Lake Gold (KL) – The company will merge with Agnico-Eagle (AEM) on March 31 2022. We sell the stock in anticipation of this merger. AEM is not in the top of its sector.
January 25, 2022
Anthony Menard
In Number Cruncher Extra

Number Cruncher Extra – Labrador Iron ore Royalty Corporation, Enghouse Systems Ltd. & Stella-Jones

In our last Number Cruncher we discussed how Labrador iron ore royalty corporation (LIF), Enghouse Systems Ltd. (ENGH) & Stella-Jones (SJ) were dividend-paying stocks with growth potential.

Here is the screener we used to find these stocks and that you can add to your personalized screeners.

Let’s start with LIF

The company has an increadible score of 78 in our system with a 90 days increase of 1. The SP score is derived from the solid performance (92.2) and risk (26.7) score. The company has a balance exposure to all factors. The company registered a solid past year with a 46.6% growth in sales and 87.2% in earnings and LIF doesn’t have to be shy of its long-term performance either with a 5-year annual sales growth of 18.9% and 32.2% for earnings growth.

 

By looking at the NOPAT and EVA trend, we know that we have a solid company. The NOPAT increased over the last 5 years, but most importantly, the EVA also grew with a lower volatility than the NOPAT. This means the company grows and creates value for shareholders.

 

Let’s continue with ENGH

The company has a score of 64 in our system with a 90 days decrease of 1. The SP score is derived from the performance (80.4) and risk (31.5) score. The company has a quality bias with a score of 77. The company has achieved healthy five-year sales and EPS growth of 10.3% and 16.5% respectively, but the lack of growth this year has been severly punished by the market this year has shown by its momentum factor of 36.

 

ENGH has a solid history of profitability and growth, but its valuation was deemed too high by our system. We seem to be at a turning point where valuation is returning to our system’s prediction.

Finally, SJ.

The company has a score of 70 in our system with a 90 days increase of 4. The SP score is derived from the performance (76) and risk (26.3) score. The company has a quality bias with a score of 79. SJ has been able to achieve respectable sales growth of 10.3% and earnings growth of 18% in the last 5 years, but most importantly, the company has grown smoothly year after year, a key attribute that shows the sustainability of their growth.

 

Stella-Jones delivered strong results, but the market reacted by contracting its valuation. The FGV tells us that Stella-Jones has the third lowest valuation in the last 5 years.

 

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