Since the start of the bull market in March 2009, U.S. equities have outperformed Canadian stocks. However, things are changing and the Canadian stock market is coming on strong, writes Validea CEO John Reese in an article for The Globe and Mail.
Despite the trend, however, Reese says that Canadian stocks are still “better bargains than their U.S. counterparts.” He cites the rebound occurring in Canada’s commodity and energy stocks and the stability of a new government as factors fueling the trend.
Citing Validea’s value-based stock screening models, Reese asserts that stocks identified using the philosophies of Benjamin Graham, Joseph Piotroski and Joel Greenblatt are performing well and offers the following picks:
- Brookfield Renewable Partners: The renewable-energy company stands to benefit from growth in the sector. Its low price-to-book value of 0.4 also suggests it has room to grow.
- Cogeco Inc.: The Montreal-based media and telecommunications company meets the Piotroski test for a stock that is unfairly undervalued. Cash flow is positive and greater than profit and its return on assets has expanded to 8.36 from 7.38 the prior year, an indication of growth.
- Brookfield Canada Office Properties: The owner of office buildings, including the 1.2-million-square-foot Exchange Tower, which houses the Toronto Stock Exchange, also fills Mr. Piotroski’s criteria. Return on assets in the most recent fiscal year was nearly double the prior year.
- Power Corp. of Canada: A Toronto-based holding company made up of a variety of financial services and communications firms. Its modest P/E ratio of 11 and price-to-book value of 0.38 suggest it has some upside potential.
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Applied to the the Canadian Equity Market