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Bullboard - Stock Discussion Forum TFI International Inc T.TFII

Alternate Symbol(s):  TFII

TFI International Inc. is a transportation and logistics company, operating across the United States and Canada through its subsidiaries. The Company's segments include Package and Courier, Less-Than-Truckload, Less-Than-Truckload, and Logistics. The Package and Courier segment is engaged in pickup, transport, and delivery of items across North America. The Less-Than-Truckload segment is... see more

TSX:TFII - Post Discussion

TFI International Inc > Morningstar
View:
Post by retiredcf on Jul 22, 2021 9:33am

Morningstar

14 companies that combine value and outperformance in a red-hot market


WHAT ARE WE LOOKING FOR?

Canadian stocks beating the market but still cheap relative to peers.

THE SCREEN

Year-to-date, the S&P/TSX Composite Total Return Index has risen 16.1 per cent, a spectacular display of the market’s resiliency as Canada continues to loosen pandemic-related restrictions. That said, the impressive performance of our equity index continues to raise the question whether we are overpaying for sought-after stocks on a tear. To this end, today I use Morningstar CPMS to look for companies that have indeed outperformed the index yet still appear undervalued relative to their peers. To find these stocks, I first ranked the largest 250 companies in the Morningstar CPMS Canadian database (excluding unit trusts) on the following momentum factors:

  • Three-, six- and nine-month price change (higher values preferred);
  • Three-, six- and nine-month market-relative price change (here the market is represented by the S&P/TSX Composite Total Return Index. In the table, a value of 16.6, for example, implies that the stock has outperformed the index by 16.6 per cent, higher values preferred).

I also observed the stocks’ sector-relative price-to-earnings, price-to-sales, price-to-book and price-to-cash-flow ratios to look for companies with multiples below their peers (in the table, a sector relative P/E ratio of 0.6 implies that the company’s P/E ratio is 40-per-cent lower than that of the sector to which it belongs). To qualify, only one of the four valuation ratios must be lower than the sector (i.e. lower than 1.0). As a quality check, I also placed a screen on the company’s five-year average return on equity such that it is positive, to ensure companies that show up have been profitable.

MORE ABOUT MORNINGSTAR

Morningstar Research Inc. is a leading provider of independent investment research in North America, Europe, Australia and Asia. Morningstar offers an extensive line of products and services for individual investors, financial advisers, asset managers, retirement plan providers and sponsors, and institutional investors. Morningstar Direct is the firm’s multiasset analysis platform built for asset management and financial services professionals. Morningstar Canada on Twitter.

WHAT WE FOUND

Where value and outperformance converge in a red-hot market

 
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COMPANY TICKER MORNINGSTAR SECTOR MKT. CAP. ($ MIL.) 3M PRICE CHG. (%) 6M PRICE CHG. (%)
Tourmaline Oil Corp. TOU-T Energy 10,056.9 26.9 84.7
Ovintiv Inc. OVV-T Energy 8,410.8 9.6 60.2
ATS Automation Tooling ATA-T Industrials 3,372.8 23.5 67.0
TFI International Inc. TFII-T Industrials 11,683.3 16.4 47.5
ARC Resources Ltd. ARX-T Energy 6,767.2 21.0 58.2
Cdn. Natural Resources CNQ-T Energy 47,298.7 7.0 38.2
SNC-Lavalin Group Inc. SNC-T Industrials 5,380.7 11.5 44.8
CI Financial Corp. CIX-T Fin'l Services 4,630.8 14.9 42.9
WSP Global Inc. WSP-T Industrials 16,527.6 13.8 22.0
Brookfield Asset Mgt. BAM-A-T Fin'l Services 98,374.0 11.3 25.9
Power Corp. of Canada POW-T Fin'l Services 24,083.5 8.2 30.1
Bank of Montreal BMO-T Fin'l Services 79,712.1 6.1 29.5
George Weston Ltd. WN-T Cons. Defensive 18,910.2 14.7 34.5
Colliers Int'l Group CIGI-T Real Estate 6,134.7 8.1 27.6

Source: Morningstar CPMS; data as of July 20

 

I used Morningstar CPMS to back-test the strategy from December, 1990, to June, 2021, assuming a 15-stock portfolio that never holds more than four stocks per economic sector. Once a month, stocks were sold if they fell below the top 35 per cent of the universe based on the aforementioned metrics, or if all four of the valuation metrics mentioned above exceeded the sector median by 10 per cent or more, that is, higher than 1.1. When sold, stocks were replaced with next qualifying stock not already held in the portfolio, keeping in mind the sector limits.

The strategy produced an annualized total return of 15.3 per cent, while the S&P/TSX Composite Total Return Index advanced 8.9 per cent on the same basis. Investors are reminded that momentum-oriented strategies like this one often come with an abundance of trading, which can be taxing to an investor not prepared to pay close attention to the portfolio. Case in point, over the test period the strategy exhibited an average portfolio turnover of 204 per cent, implying that each of the 15 stocks in the portfolio were replaced twice a year, on average. If we were to assume a fairly aggressive trading commission of 5 cents a share over the course of the test period, the annualized return drops down to 14.1 per cent annualized, still well ahead of the benchmark.

Only 14 stocks qualify to be purchased into the strategy today and they are shown in the accompanying table. This article does not constitute financial advice. It is always recommended to speak with a financial adviser or professional before investing.

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