Friday, 11 May 2012

Top 10 Picks Amongst Low Volatility Stocks

Last week we ended our review of low volatility stocks with the comment that further drilling into their fundamentals would give more confidence about their investment merit. That's what we will do this week.

What we hope to find is stability and safety based on:
  • earnings consistency, or even better, earnings growth with high return on the investor's equity
  • dividend growth or at least maintaining pace with about 3% annual inflation and certainly avoiding dividend cuts
  • manageable debt levels within or below norms for an industry sector
  • reasonable stock valuation levels of the current market price relative to the overall market TSX (which now has an average Price per share to Earnings per share ratio of about 14.9 per this TMX Money page), and compared to the industry sector average
The Ten Best Stocks
Our detailed comparison table below shows the figures we used to arrive at our choices. Blog readers may wish to expand on our choices or make their own alternate selections. In our table green cells contain good numbers while the red cells contain the bad and the white cell numbers are acceptable.

We've made some effort to spread our choices out amongst different sectors though there are no top picks in three sectors: utilities and pipelines, because those stocks appear not to be good bargains with P/Es over the TSX average and; financial services, because most have had declining earnings.

  • Metro Inc (TSX symbol: MRU) - The grocery retailer has presented a steady diet of fine results to investors and there seem to be no signs of that ending.
  • Shoppers Drug Mart (TSX: SC) - The drug retailer's growth may be slowing (per the latest quarterly report) but slow and steady progress is a lot better than other stock performances these days.
  • RioCan Real Estate Investment (TSX: REI.UN) - The largest of the REITs, it runs shopping centers. You know where your money is invested and you can feel good about going shopping at a facility you partly own.
  • First Capital Realty (TSX: FCR) - This is another shopping center developer and operator that has been consistently delivering solid results.
  • Bank of Nova Scotia (TSX: BNS) - The Canadian banks all make money but this one has slightly better numbers.
  • National Bank of Canada (TSX: NA) - Maybe it is less noticed by investors in the shadow of its bigger rivals but National has the best numbers of the lot.
  • CGI Group (TSX: GIB.A) - The information technology and business process service provider has not yet ever paid dividends but it has provided consistent, strong and growing profits as this TMX Money page shows.
  • Rogers Communications (TSX: RCI.B) - The cable and wireless service company also has done consistently and brilliantly well for investors. One analyst is predicting a slowdown in profit growth according to this GlobeInvestor article.
  • Astral Media (TSX: ACM.A) - Astral provides pay and pay-per-view tv and radio broadcasting. Financial results are very solid.
  • Canadian National Railway (TSX: CNR) - There is a lot of machination going on at CP and perhaps a revival of the company in the offing but investors can simply buy shares in the railway that is already well run. For all its well known success, CN still seems a fairly priced stock at the moment.
Even with all this data gathering, we cannot be 100% sure that all these stocks will continue to perform well. As ever, the future may not be like the past. However doing such investigation improves the odds in our favour.

Disclaimer: this post is my opinion only and should not be construed as investment advice. Readers should be aware that the above comparisons are not an investment recommendation. They rest on other sources, whose accuracy is not guaranteed and the article may not interpret such results correctly. Do your homework before making any decisions and consider consulting a professional advisor.

No comments: