What are we looking for?
The best aggressive Canadian stocks.
More about today's screen
We're looking for stocks that might be volatile but have a great chance at producing some higher returns.
We'll look for help with today's screen from Morningstar CPMS, which has set up an aggressive portfolio screen using several criteria.
To make the list of aggressive stocks, it must have the best combination of: rising earnings estimates; rising earnings year over year; positive earnings surprises; and strong stock price momentum over the past three, six, nine and 12 months.
CPMS takes all the criteria and ranks the top 20 in a screen of about 200 Canadian large and mid-cap stocks.
Aggressive plus conservative portfolios
Last week, we looked at CPMS's conservative portfolio. If you put the conservative and aggressive portfolio together, you get what CPMS calls its Core 20 Portfolio.
Risk is minimized in this strategy by diversification in three ways: maximum number of stocks per sector is 25 per cent of the portfolio, half of the portfolio is aggressive and half conservative, and each stock gets an equal weighting in the portfolio.
This Core 20 Portfolio has done well over the short and long term. Over the past year, it is up more than 33 per cent or almost double that of the S&P/TSX composite total return index. It is also up about 14 per cent over the past decade, again about double that of the S&P/TSX composite total return (not including any fees).
But the conservative and aggressive portfolio can stand on their own as well.
"A standalone 20-stock model based on the aggressive half of the Core 20 beat the S&P/TSX composite total return index by 26 per cent in 2010," said Jamie Hynes, a senior consultant at CPMS. "On the downside, it still lags the S&P/TSX composite total return by 4 per cent annualized over the last three years. Over 25 years, the aggressive outperforms by 6.7 per cent annualized [all returns include a 2-per-cent annual management fee]."
The aggressive portfolio performs much stronger than the conservative portfolio over the long term, but it comes with higher volatility and turnover. The aggressive portfolio turnover is 140 per cent, meaning the names in it change 1.4 times every year.