WHAT WE'RE LOOKING FOR
It's Day Three of our weeklong look at the stocks held by major TSX-listed exchange-traded funds.
We're zeroing in specifically on the wealth-creating power of the stocks in these ETFs. Our tool is EVA, or economic value added, which is a stringent measure of a company's profitability.
Here, we compare EVA scores for the Claymore Canadian Fundamental Index ETF (CRQ) with its constituent stocks.
TODAY'S SCREEN
Montreal-based Stockpointer, a specialist in EVA analysis, has alphabetically listed the stocks that account for the vast majority of the assets in CRQ.
You'll also find data on each stock's intrinsic value, which is what a stock should be trading at according to the economic value it creates for shareholders.
Price over intrinsic value puts a stock's actual trading price in perspective. Higher numbers suggest an over-valued stock, while a score under 1.0 suggests bargain pricing.
Finally, Stockpointer has provided an economic performance index score for each stock. The EPI offers a way of comparing EVA for companies across different sectors. A company needs an index score of at least 1.0 to be considered a wealth creator.
WHAT WE FOUND
CRQ itself rates a 1.0 on the economic performance index, which suggests the solid wealth creators in the underlying FTSE RAFI Canada Index are pretty much in balance with the weaker names. Look for stocks with high EPI scores if you prefer holding individual stocks to owning the ETF.
Then, find the stocks trading below their intrinsic value as calculated by Stockpointer. Research In Motion stands out in this regard, as do Fairfax Financial Holdings, National Bank of Canada, Power Corp. of Canada and Rogers Communications.