Wednesday, October 30, 2013

Money Show 2013 - Laurent Marien

Laurent Marien is Portfolio manager for StockPointer. His talk was called "Build a Portfolio of Top Economic Performers to Beat the Market with StockPointer". The approach in StockPointer is the EVA model. The web site is here.

First you do market allocation and then sector weight and then stock selection (based on StockPointer score and StockPointer reports). The portfolio analysis behind StockPointer is EVA (Economic Value added). This is the Return on Capital less the Cost of Capital. They focus on wealth creation for shareholders. Their Canadian Portfolio has 25 stocks and it is rebalanced quarterly.

In sector selection they have their own Indexes called SPIX and this is a propriety index. They show the top 100 Canadian stocks. They give a relative performance Index for each stock which is Return of Capital /Cost of Capital; a Price/Intrinsic index, and an Economic Performance Index for each stock. All stocks have a market cap of over $200M. Today, what you should hold in each sector is: Energy - 2; Materials - 1; Industrials - 4; Consumer Discretionary - 4; Consumer Staples - 4; Health Care - 1; Financials - 6; Information Tech - 1; Telecom - 1 and Utilities - 1.

For an example of their stock selection, he looked at Consumer Staples. They had 7 top performers. They were Metro Inc. (TSX-MRU), Alimentation Couche-Tard (TSX-ATD.B), Empire Company (TSX-EMP.A), Shoppers Drug Mart (TSX-SC) (still on TSX), Saputo In. (TSX-SAP), North West Company (TSX-NWC) and Jean Coutu Group (TSX-PJC.A). They form a list of top performers and then take risk into consideration.

The first stock he looked at depth is Metro Inc. (TSX-MRU) which was at $65.62 and program said it had an intrinsic value of $137.37, so the Price/Intrinsic Value Ratio is 0.48. The Return of Capital is above 10% and increasing. It has positive Free Cash Flow.

The next stock is Alimentation Couche-Tard (TSX-ATD.B), trading at $70.75 with an Intrinsic Value of $119.61 and therefore a P/IV Ratio of 0.59.

On Empire Company (TSX-EMP.A), he gets a current price of $75.71 and Intrinsic Value of $151.52, so it has a P/IV Ratio of 0.50. The Return on Capital is lower than 10%.

Saputo In. (TSX-SAP) has a current price of $51.46 and an intrinsic value of $64.47, with a P/IV Ratio of 0.84. This company has issues with its dairy divisions. The Return on Capital is higher than 10% and is going up.

North West Company (TSX-NWC) has a current price of $25.18 and an intrinsic value of $28.08. The P/IV Ratio is 0.87. The Return on Capital is above 10% but it is trending down.

Jean Coutu Group (TSX-PJC.A) has a current price of $18.39 and an intrinsic value of $21.08 and the P/IV is 0.87. The intrinsic Value of this stock fluctuations and is not as stable as other stocks in this list and therefore it has more risk. The Return on Capital is above 10% and going up.

The four stocks that you should buy would be Metro Inc. (TSX-MRU), Alimentation Couche-Tard (TSX-ATD.B), Saputo In. (TSX-SAP) and North West Company (TSX-NWC). You would buy NWC over Empire because the ROC on Empire is lower than 10%.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

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