I’ve developed a series of ranking and criteria to automate my screening process when looking for candidates for my watchlist. As per my initial post on this topic, here is an update (which I plan to post at every 6 months) on how that initial list looks like for the second half of this year.
The mechanism to screen for these companies are factor based, which is driven from fundamentals. And it’s interesting that we’re seen a similar scenario like we had in 1999, where many of the quality and fairly valued companies kept going against the market, which means, many of these companies were getting overvalued. However, price follows earnings eventually (for the majority of sectors), and performance for many of these undervalued companies started to improve, while the overvalued companies crashed – not necessarily because they were poor quality companies, but because they were very overvalued.
I will continue to update the performance graph as I issue these updates about every 6 months. The current list is smaller than 6 months ago because many companies did not pass the valuation criteria, since it’s based on price to book, price to earnings and projected growth revision – companies that lowered their guidance or are not estimated to have an attractive growth potential for now didn’t make the list. However, this is a mechanical list with great potential candidates at this moment – it doesn’t mean that we can’t find other high quality undervalued companies.
Screener performance for Canadian companies:
Screener performance for US companies:
Here is the list with the Canadian and US stocks that meet the criteria above for quality and valuation.
Please let me know if you have any questions.