Mr. Bowman is a portfolio manager at Hamilton-based Wickham Investment Counsel Inc., an adviser to high-net-worth clients.
What are we looking for?
Last week, we looked at Canadian-listed stocks that rose more in an advancing market than they fell in a declining market. Today, we scan for U.S. stocks that have shown the same trait.
The screen
My colleague Rob Belanger and I started with firms listed on the S&P 500 that are larger than $10-billion (U.S.) in market capitalization and we sorted them from the largest to the smallest.
The five-year bear and bull betas are relative measures of the sensitivity of a stock's performance to the negative or positive changes in the benchmark, in this case the S&P 500 index. A bear beta of 0.5 implies that for each 1 per cent fall in the index the stock fell 0.5 per cent or 50 per cent of the benchmark's return. A bull beta of 1.25 indicates that for every 1 per cent gain in the index the stock gained 1.25 per cent, or 125 per cent of the benchmark's return.
We are only showing companies where the bull beta is more than the bear beta, meaning these companies rose more in a bull market than they fell in a declining market. In addition, we are only showing companies where the bull beta is more than one, indicating these companies outperformed in a rising market. The bear beta had to be less than one, meaning these companies outperformed in a declining market.
Once a stock's new high is reached, the percentage change from that high to the lowest low in the past year is called a drawdown, and we are looking for a low number. The drawdown is a measure of an investment's financial risk.
Return on equity (ROE) measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. Companies had to have a ROE greater than 5 per cent to be included in our list.
What did we find?
Express Scripts is a full service pharmacy benefit management company handling more than a million prescriptions every day. If the index rose 1 per cent, Express was up 2.2 per cent and the share price only fell 0.8 per cent if the index dipped 1 per cent.
Over the past five years, Google gained 1.7 per cent when the index was up 1 per cent and only fell 0.7 per cent when the index tumbled 1 per cent.
The company with the smallest drawdown was medical device manufacturer Stryker Corp. The company makes everything from replacement hips and knees, to bone cutters and spinal implants.
Please contact an investment professional or conduct further research before investing in any of the companies mentioned here.