Special praise is warranted for stocks that earn an A in both value and growth, but this year no stock made it to the All Star stocks honour roll for that distinction. But 14 firms still made it onto the exclusive team by earning at least one A and one B on our value and growth tests. That is the only way a stock can make the All Star cut.
Half of this year’s All Stars were also on last year’s All Star team. We’re pleased to say that all of the returnees generated big gains over the last 12 months with total returns ranging from a low of 17% to a high of 48%.
The first two returning team members are Power Corp of Canada (POW) and its subsidiary Power Financial (PWF). Both firms are based in Montreal and have interests in insurance, money-management, and many other businesses. They also happen to pay generous dividend yields of 4.4% and 4.6%, respectively.
Linamar (LNR) posted the best return of the returnees with a gain of 48% over the last 12 months. The auto-parts company makes its home in Guelph and has seen its earnings-per-share zoom up by an average of 19% per year over the last three years.
A couple of life and health insurance companies made the grade both this year and last year. The first is Sun Life Financial (SLF), which makes its home in Toronto and happens to be the largest of the All Stars based on its $31-billion market capitalization. The second is Industrial Alliance Insurance (IAG), which is a slightly better bargain based on its book value multiple of 1.35. The latter is based in Quebec City.
On the materials side of the equation, Cascades (CAS) makes and markets packaging and tissue products using recycled fibers. The firm is based on Kingsey Falls, Que. and its stock trades at three times earnings. But the firm’s earnings are unusually high this year because it recently sold its stake in Boralex (BLX).
The last returnee is WestJet Airlines (WJA). The Calgary-based airline’s stock soared 24% over the last 12 months but it still trades at less than 10 times forward earnings.
The seven newcomers include Magna International (MG), which is headquartered in Aurora, Ont. The auto-parts firm trades at less than 10 times trailing earnings and nine times forward earnings.
Cervus Equipment (CERV) is an equipment dealer with operations in Canada, Australia, and New Zealand that sells to agricultural, transportation, commercial and industrial firms. The Calgary-based company is the smallest All Star with a market capitalization of $229 million. It is also the cheapest relative to sales with a price-to-sales ratio of 0.19.
Genworth MI Canada (MIC) provides residential mortgage insurance and makes its home in Oakville, Ontario. The company would be tested – perhaps to the breaking point —should the Canadian real estate market suffer a severe meltdown. But it trades at 0.94 times book value and seven times earnings, which indicates that it could do quite well in less apocalyptic scenarios.
Hudbay Minerals (HBM) is a large mining concern based in Toronto with operations across the Americas. The firm digs up copper, precious metals and zinc. It boasts the largest 12-month total return of the All Stars at 82% and the best average annual sales-per-share gain over the last three years at 24%.
Lassonde Industries (LAS.A) primarily produces fruit and vegetable beverages along with sauces and soups. It makes its home in Rougemont, Que. and has grown smartly with average annual sales-per-share and earnings-per-share gains north of 10% over the last three years.
Magellan Aerospace (MAL) is based in Mississauga and provides assemblies and systems to aircraft and engine manufacturers worldwide. It’s a smaller firm with revenues of $986 million and trades at a modest 11 times earnings.
Montreal-based engineering firm WSP Global (WSP) rounds out this year’s All Star list. It operates out of more than 500 offices throughout the world and has seen its sales-per-share grow by an average of 18% annually over the last three years. Its stock has climbed by 31% over the last 12 months.
Before dashing off to buy any stock, do your own due diligence. Make sure its situation hasn’t changed in some important way. Read the latest press releases and regulatory filings. Scan media stories and get up to speed on all the recent developments. (Take particular care when when buying or selling stocks that trade infrequently.) If you do, you’ll be more likely to enjoy what the market has to offer.
Canadian All-Stars 2018★: 2018 MoneySense All Star Stock
|Name||Ticker||Industry Group||Industry Subgroup||Price (October 19, 2017)||Revenue ($M)||Market Capitalization ($M)||Price/Book||Price/TangibleBook||P/E (Last 12 Months)||Forward P/E||Dividend Yield||Leverage (Assets/Equity)||Value Grade||1Yr Total Return (%)||3 Yr EPS Growth (%)||3 Yr SPS Growth (%)||1 Yr Asset Growth (%)||Return on Equity (%)||Price/Sales||Growth Grade|
|Cascades||CAS||Forest Products & Paper||Paper&Related Products||$16.05||$4,136||$1,520||1.0||2.3||3.0||11.8||1.0%||2.9||B||24.9%||94.6%||5.3%||26.2%||42.4%||0.37||A|
|Cervus Equipment||CERV||Retail||Retail-Gardening Prod||$14.50||$1,195||$229||1.0||1.5||8.8||10.7||1.9%||2.4||B||15.9%||10.3%||7.4%||-13.0%||12.7%||0.19||A|
|Genworth MI Canada||MIC||Insurance||Financial Guarantee Ins||$39.20||$925||$3,573||0.9||0.9||7.3||8.6||4.5%||1.8||A||40.3%||10.1%||7.5%||4.9%||13.4%||3.89||B|
|Industrial Alliance Insurance||IAG||Insurance||Life/Health Insurance||$57.25||$9,403||$6,099||1.4||1.7||11.1||11.1||2.4%||12.2||A||17.9%||10.7%||-0.2%||5.9%||12.8%||0.64||B|
|Linamar||LNR||Auto Parts & Equipment||Auto/Trk Prts&Equip-Orig||$79.08||$6,253||$5,163||1.8||2.4||9.5||9.0||0.6%||2.0||B||48.1%||19.5%||14.9%||8.7%||20.6%||0.83||A|
|Magna International||MG||Auto Parts & Equipment||Auto/Trk Prts&Equip-Orig||$68.25||$46,366||$25,103||1.9||2.5||9.8||8.5||2.0%||2.2||B||31.3%||9.8%||6.2%||7.4%||21.0%||0.56||A|
|Power Corp of Canada||POW||Insurance||Life/Health Insurance||$32.44||$49,448||$15,046||1.1||-||11.0||10.5||4.4%||12.0||A||19.1%||4.1%||6.4%||5.3%||10.8%||0.30||B|
|Power Financial||PWF||Insurance||Life/Health Insurance||$35.70||$48,031||$25,464||1.5||12.5||11.7||10.5||4.6%||12.9||A||19.9%||-||7.0%||5.3%||13.0%||0.53||B|
|Sun Life Financial||SLF||Insurance||Life/Health Insurance||$49.84||$25,389||$30,545||1.5||2.3||11.8||11.7||3.5%||11.5||B||17.4%||12.3%||3.0%||5.1%||13.4%||1.20||A|
|WSP Global||WSP||Engineering & Construction||Engineering/R&D Services||$53.05||$6,702||$5,451||1.9||-||23.5||17.9||2.8%||2.1||B||30.5%||13.6%||18.3%||3.8%||8.0%||0.80||A|
Norm Rothery, CFA, PhD, tweets as @NormanRothery. He may hold some of the securities mentioned in this article.