Category

Screeners

Custom SPfilter – EVA Momentum + Dividend growth

In today’s content analysis, we built a custom SPfilter looking for Canadian companies showing EVA momentum, dividend growth, and solid balance sheets.

Here is the Excel spreadsheet Download  which contains the results, and the PFscan Download of the constituents.

Here is the list of criteria we asked for :

– Return on capital above 10%;

– Debt / equity ratio below 100%;

– Positive Free cash flows / Capital ratio;

– Positive 3 month change in the intrinsic value;

– Positive 12 and 24 months EVA change;

– EPI above 1.5;

– Positive 5Y annualised dividend growth rate.

SPfilter US Insurance Companies

Last Wednesday, the Federal Reserve decided to raise short-term interest rates for the first time since 2009. While it is true to say that higher interest rates generally mean higher borrowing costs, there are still some sectors that should benefit from this. The Insurance industry is one of them. Insurance companies almost only hold safe debt to back their policies, and these investments have been returning weak returns since the financial crisis. They will yield much better returns in a higher rate environment. Higher interest rates also mean the economy is strengthening and consumer spending is increasing; more car and home sales, which is definitely good news for insurance companies!

We have thus screened the US Insurance companies with four criteria, covering economic performance and also accounting performance.

– An economic performance index, or EPI (return on capital divided by cost of capital) above 1.0. An EPI ratio of 1.0 or more indicates a company’s capacity to create wealth for its shareholders (a higher EPI displays a greater rate of wealth creation);

– Return on Capital above 10 per cent;

– Dividend yield above 1.5 per cent;

– An annualized dividend growth rate of 5 per cent or more over the last 1, 2, 3 and 4 years.

10 US Insurance companies are identified by our screener (click Download ). Amtrust Financial Services (AFSI) is by far the best economic performer with an EPI of 3.1, and also one of the top dividend growers of this group. Maiden Holdings Ltd (MHLD) has the smallest market cap of this group, but offers the best dividend yield with a very aggressive dividend growth too. For someone who wants to stick with Large Caps (Marsh & McLennan, Chubb Corp, Travelers Cos Inc), Chubb (CB) not only offers the best dividend growth rate, but you can see this growth rate has been accelerating every year over the last 4 years.

Custom SPfilter – November 12th

For this week’s content analysis we’re providing the structure and results of a custom filter we’ve built. The filter uses exactly the same criteria as the one we sent you previously this year, on May 27th. This filter puts an emphasis on three key evaluation areas:

1. Generation of shareholder wealth (EVA/Share, Economic Performance Index, return on capital

2. Growth (short and mid-term growth of EVA/Share, dividend growth in each of the past four years)

3. Free Cash-Flow provision

As of November 12th, the group of stocks that were identified by this filter on May 27th (equal-weight) generated a positive return of 3.39% while the TSX Composite Index dropped by 12.06%. To see this previous blog post, please click here.

Only 1.5% (14 of 911) of our Canadian stock universe meets our stated criteria.

The results are sorted by Economic Performance Index (EPI). We’ve included a few other indicators for reference—see share price, Price/Earnings, current 12-month dividend yield.

In the attached PDF document you’ll find both the contents and criteria inputs for the filter, as well as the 14 resulting companies which passed these criteria.  Download

SP Filter – Economic Inconsistencies (US)

In this week’s content analysis, we are applying the pre-made SP filter “Economic Inconsistencies” to the US market. This filter identifies companies that portray anomalies between their accounting performance, as shown in the financial statements, and their economic performance (EVA).

As of September 11th, only five American companies appear on this list: Insperity Inc (NSP), Trc Cos Inc (TRR), Merit Medical Systems Inc (MMSI), Synchronoss Tehnologies (SNCR) and Sterling Bancorp (STL). In order to better explain why these companies are identified by this filter, we will take a look at the executive summary of Insperity Inc (NSP).  Download

In the third section of the report, entitled Economic Performance, the EVA-portraying graph on the left is the graph we are most interested in looking at. On this graph, we can see that the accounting profit (green curve) has been increasing since December 2014, and that the price has had the tendency to follow the accounting profit. On the other hand, the EVA (blue curve), has not stopped diminishing since December 2011. In other words, although the accounting profit is growing, the creation of economic wealth for the company’s shareholders keeps weakening, and has even reached a negative result. The stock has lost 25% in the last six months, and the company’s current EVA does not give the indication that this trend will reverse in the near future. Unfortunately, the market readjusted itself, probably realizing that the increase in accounting profit did not translate to real economic improvement for the company.

In conclusion, do not forget that StockPointer can also help you avoid risky investments, as shown in the above case study. A portfolio that is performing well is obviously based upon the stocks that are held in it, but also by the stocks that are avoided.

Top 20 SPscore – Canada

For this week’s content analysis, we will revisit the Canadian EVA Top 20 Performers. Over the past two weeks, several companies’ Q2 results were updated in our Stockpointer database. You will also find at the bottom of the attached document a list of companies – within the Top 20 – that are scheduled to report in the coming weeks.  Download

The most recent publication of the Canadian Top 20 on our blog took place during the week of April 27th. Since then, the performance of this equally weighted group is -2.39%. During the same period, the S&P/TSX Composite index yielded a return of -6.47%. Please note that our calculations are based on today’s mid-day prices (August 6th) and that dividends were not included in our calculations for both the EVA Top 20 and the benchmark.

Custom SPfilter (S&P500)

For this week’s content analysis we’re providing the structure and results of the custom filter we’ve built on May 27th, but now focusing on the S&P500. This filter puts an emphasis on three key evaluation areas:

1. Generation of shareholder wealth (EVA/Share, Economic Performance Index, return on capital)

2. Growth (short and mid-term growth of EVA/Share, dividend growth in each of the past four years)

3. Free Cash-Flow provision

Only 4% (20 of 500) of the S&P500 meets our stated criteria.

The results are sorted by Economic Performance Index (EPI). We’ve included a few other indicators for reference—see share price, Price/Earnings, current 12-month dividend yield.

In the attached Excel document you’ll find both the contents and criteria inputs for the filter, as well as the 20 resulting companies which passed these criteria.  Download

Top 20 SPscore – Canada

For this week’s content analysis we’re diving into the SPScore tool to identify the top-20 overall companies in the Canadian market, ranked by SPScore, for all sectors and market caps. While this list represents the 20 best SPScores in Canada, we then sorted this top-20 by Economic Performance Index (EPI) to provide the attached table. By doing so, we are prioritizing economic performance (return on capital vs cost of capital), or put otherwise, the creation of shareholder wealth.  Download

One initial takeaway which we find surprising is that within these top-20 Canadian companies, only five are not active constituents of the S&P/TSX Composite Index. However, once sorted by EPI, four of these five (GS, GBT.A, ESL, LGT.B) are ranked in the top-5. Despite lower market caps, all between $500M and $1Bn, these companies merit consideration, particularly given that each has been showing up in many of our filters for the past few months.

Looking at it from a different angle, we’ll point out Intact Financial (IFC), Thomson-Reuters (TRI) and Cogeco Cable (CCA), who are notable for the recent increase in their SPScores. Each one of these three companies is trading at a discount—whether measured by Intrinsic Value (P/IV < 1) or by future growth value (FGV/EV < 0%)—while also offering a dividend yield greater than 1.5%, and a 5-year annualized dividend growth rate above 5%.

* Please note that in the attached table, the 12-month dividend yield (Div % 12M) includes the payment of special dividends, if applicable.