WEEKLY COMMENTARY

Stockscores Market Minutes Video
A strong stock in a strong sector has a greater chance for success. Learn how to use the Stockscores.com Sector Watch tool to focus on the right sectors with this week’s Market Minutes, watch the video on Youtube by clicking here.

There are two risk factors which contribute to a stock’s price performance. First, those factors directly related to the company’s business. Earnings, management, new products or services – these are termed Alpha factors and are what the market is interested in when seeking stocks that can beat the performance of the overall index or sector group.

The second factor is the market itself. All stocks have some correlation to what the overall market is doing because all companies are dependent on the general economy and investor psychology. The Beta factor is what guides most stocks most of the time.

My approach to the market is to focus on abnormal activity. This brings out the Alpha factor which is what allows a stock to beat the performance of the overall market. When stocks are trading abnormally, it is likely that there is something happening with their company fundamentals that deserves attention.

With this in mind, it is still important that respect the Beta factor. A gold miner that discovers Gold will not be rewarded as well as it should if the price of Gold is falling and there is a general sense of pessimism around Gold mining stocks. You have to pay attention to the health of the stock’s sector.

That makes Sector analysis an important part of the research process. You can use Stockscores.com to gauge the strength of a stock’s sector. If you find a stock you like, its investment quality is better if the sector is also strong.

For most large cap stocks, Stockscores will show the sector chart and rating. To see it, first pull up the stock chart by entering the symbol in the upper right of Stockscores.com. Below the large chart or beside the small chart you will see a Sector tab. Click on that to see the chart and Stockscores of the company’s sector. Give favor to the stocks that have a strong sector confirmation.

Want to see the ratings for all of the Sectors? Advanced and Pro Stockscores users can utilize the Sector Watch tool to see the Stockscores ratings for all sectors. Focus on the sectors with a Sentiment Stockscore of 60 or higher.

STRATEGY OF THE WEEK

Here is the scenario. You are a Canadian investor, retired or nearing retirement and looking for stocks that pay a yield but also have some potential for capital appreciation. Here is a scan that will help you find some good candidates:

Exchange = All Canadian
Sentiment Stockscores > 60 < 75
Pays Dividends – Checked
Yield > 2%

I ran this scan and found the following stocks that have good yields and good charts. Keep in mind that the yield amounts quoted are historical and are not guaranteed to be future yield.

STOCKS THAT MEET THE FEATURED STRATEGY

1. T.PGF
T.PGF has been on my feature list since it was at $6, it is now $6.69 and the historical yield is 7.17%. Rising bottoms over the past 7 months show investors are optimistic after a lengthy period of poor performance.

2. T.SGY
After a bad month of November, T.SGY has bounced and broken its pull back, appearing poised to continue the long term upward trend. Historical yield is 7.91%.

3. T.AQN
T.AQN recently saw its Sentiment Stockscores cross up and over the 60 threshold as it breaks higher from a rising bottom. Historical yield of 4.89%.

References

• Get the Stockscore on any of over 20,000 North American stocks.
• Background on the theories used by Stockscores.
• Strategies that can help you find new opportunities.
• Scan the market using extensive filter criteria.
• Build a portfolio of stocks and view a slide show of their charts.
• See which sectors are leading the market, and their components.

Disclaimer
This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don’t consider buying or selling any stock without conducting your own due diligence.

Just as BMO (Bank of Montreal) had regained the pre-crisis 2007 highs (see chart above), an earnings report that looked good on the surface has hit the stock.

We continue to hold the stock for now. However, the BMO results may indicate a sea change in the direction of Canadian bank stocks as a whole. Even though the economy has been aided by low interest rates, things are getting punch-drunk on the liquidity and the absence of new economic growth catalysts (especially with China fading) is making it more difficult for financial services companies to find new solid areas of opportunity.

Bank of Montreal (BMO) is held in the McIver-Jasayko Model Portfolios as of December 3 2013. Comments about BMO are not intended as advice and do not constitute a recommendation to buy, sell, or hold.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates. Assumptions, opinions and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. 

Richardson GMP Limited, Member Canadian Investor Protection Fund.

Richardson is a trade-mark of James Richardson & Sons, Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.