What are we looking for?
Canadian-listed stocks that align with the principles of legendary value investor Benjamin Graham.
For value investors who seek stocks with strong financial stability and attractive valuations, we’ve built a screen inspired by Mr. Graham’s timeless principles. Known as the father of value investing, Mr. Graham emphasized a disciplined approach to stock selection that focuses on companies with solid fundamentals and a margin of safety.
His method prioritizes businesses that are not only undervalued by the market but also financially resilient and are capable of weathering economic downturns and generating consistent returns for shareholders. By applying his core principles, we aim to identify stocks that offer downside protection and long-term appreciation potential, making them appealing to investors who prioritize stability alongside growth.
The screen
We used Trading Central’s Strategy Builder to screen for Canadian-listed stocks with good financial strength and attractive valuations.
We began by setting a minimum market capitalization of $2-billion to ensure a focus on stable, established companies with lower volatility than smaller-cap stocks.
Next, we targeted companies with low valuation metrics, selecting stocks with a price-to-earnings (P/E) ratio below 15 and a price-to-book (P/B) ratio under 1.5 to identify potential bargains in the market. A P/B ratio below 1.5 suggests a stock may be undervalued relative to its assets, providing a margin of safety.
To ensure financial stability, we included companies with a debt-to-equity ratio below 1, reflecting manageable leverage.
Lastly, we screened for stocks offering a dividend yield of at least 2 per cent, ensuring a focus on companies that not only provide value but also generate consistent income for investors.
We have also included the current ratio and year-to-date and one-year price performance for each stock for your reference. Mr. Graham preferred a current ratio greater than 2, suggesting the company has sufficient short-term assets to meet its liabilities.
More about Trading Central
Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener, is available through leading retail brokers in Canada and worldwide.
What we found
IGM Financial Inc. IGM-T, which tops our list, is a leading Canadian wealth management firm with strong financial fundamentals. The company trades at a P/E of 11.61 and a P/B of 1.39, indicating reasonable valuation levels. Its 4.93-per-cent dividend yield offers consistent income, while one-year price performance of 28.5 per cent signals positive momentum. The company has a current ratio of 3.61, the highest on our screen. A high ratio indicates strong liquidity, meaning the company has ample short-term assets to cover its liabilities, thereby reducing financial risk.
Whitecap Resources Inc. WCP-T, which follows, is a Canadian oil and gas company with a compelling value profile. With a P/E of 6.83 and a P/B of 1.03, the stock appears undervalued relative to its asset base. The debt-to-equity ratio of 0.22 signals a conservative balance sheet, while its 7.37-per-cent dividend yield adds appeal for income-focused investors.
Cenovus Energy Inc. CVE-T, a major Canadian oil and gas producer, presents a compelling value opportunity with a P/E ratio of 11.19 and a P/B ratio of 1.4, indicating it is reasonably priced relative to its earnings and assets. The company also offers a dividend yield of 3.23 per cent, providing investors with steady income alongside its energy sector exposure. Additionally, Cenovus maintains a current ratio of 1.59, reflecting strong liquidity and the ability to cover short-term obligations, reinforcing its financial resilience.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of investing in financial instruments. Investors should conduct further research before investing.
Gary Christie is head of North American research at Trading Central in Ottawa.