Stock Talk- Pooled approach

Delivers consistency in portfolios.

Ashley Redmond 25 January, 2013 | 2:00PM
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Ashley Redmond: Hi everyone, and welcome back to Stock Talk. With 2013 already in full swing, we're continuing to look for new ideas for investors.

Melissa Kahnert: Exactly. Today we're going to be concentrating on a diversified approach for investors that has delivered consistent historical returns.

Redmond: And consistent performance is something we talk about a lot in this segment, but it's something that investors really need in this economy.

Kahnert: Definitely. The pooled approach, which is no strange topic to all investors, incorporates various investment strategies into one model. So, the opportunity for investors is that they can actually capitalize on different market returns, following the various strategies within their portfolio.

For the CPMS Canadian Triple 5, one of our most popular models, we're going to be incorporating an income, predictable growth and momentum strategy within the portfolio. An income model is going to be concentrating more in high yielding companies. Predictable growth, we are looking for companies that have rising earnings and reasonable price to earnings ratios. Finally, the momentum is going to be focusing on price movement and also companies with positive earnings expectations.

Redmond: Sounds great. So, I am sure all the investors at home or at work want to know what are the holdings in the portfolio?

Kahnert: Well, in the portfolio the holdings are: Ainsworth Lumber, Bank of Nova Scotia, Capstone Infrastructure, Canadian Western Bank, Chorus Aviation, CML Healthcare, Home Capital Group, Parkland Fuel, Patheon, Rio Alto Mining, ShawCor, Sierra Wireless, Superior Plus Corp., Transat and West Fraser Timber.

Redmond: For investors who usually watch this segment, the chart up on the screen is actually a little different than usual. There is actually a letter grade associated with each company. So, what does that mean?

Kahnert: Well, the letter grades are actually exclusive to CPMS. It's a grading system that we use out of the entire universe. So, for instance, in our Canadian universe, we now have 733 stocks. A letter grade of A would be a great score, whereas a letter grade of E would be more of a poor score. And some of our models we like to use letter grades instead of hard fast data as it won't cut off some good opportunities for these investors if they are off by only a couple basis points.

So, for Triple 5, we're taking a look at the letter grades today, and you can see that they've attracted some pretty good buying potential.

Redmond: Yeah, it looks like they're actually all in the upper end of the universe.

Kahnert: Exactly. In 2012, the Triple 5 posted a total return of 16.7%, which was the highest return for any of CPMS Canadian strategies. By comparison, the S&P/TSX Total Return Index returned only 7.2%. Since inception on December 31, 1985, this model has generated annualized returns of 16.5% against only 8.2% of the index.

Redmond: 16.5%, that's fantastic long-term performance. So, it looks like that model would really add value for investors.

Kahnert: Exactly, it's a fantastic model. One of many different choices, but just to reiterate to investors that sometimes discipline money management has a huge spot in all of our portfolios and our investment goals. But just like with all of our conversations on Stock Talk, it's important for investors to speak to their advisor and make sure that this is appropriate for them or do their own due diligence if they are managing their own investments.

Redmond: Some great ideas here, Melissa.

Kahnert: Yeah. Thank you very much.

Redmond: And just a reminder, Melissa is not providing financial advice. We encourage you to speak with the financial planner or advisor before selecting stocks; of course, you can do your own research. CPMS software is only available to institutional clients and investment advisors; however, you can find free stock quotes at the top of morningstar.ca.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Bank of Nova Scotia78.94 CAD0.83Rating
Canadian Western Bank55.59 CAD-5.38
Chorus Aviation Inc3.36 CAD-0.88
Home Capital Group Inc  
Parkland Corp36.34 CAD-1.30
Shawcor Ltd13.59 CAD-1.88
Superior Plus Corp6.64 CAD-3.49
West Fraser Timber Co.Ltd132.88 CAD-0.81Rating

About Author

Ashley Redmond

Ashley Redmond  Ashley Redmond is a Vancouver-based freelance writer.

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