Monday, April 17, 2017

10 Canadian Contrarian Stocks That Pay Dividends

After finishing the Market Masters book profiled in my last blog post, I borrowed a copy of The Contrarian Investor's 13 at my local library as I found Benj Gallander an intriguing personality. Benj co-founded the Contra the Heard newsletter in 1995 and the 19% annualized 15-year return on his President's Portfolio is extremely impressive.

A couple of timeless tips from The Contrarian Investor's 13 that are worth sharing:
1. Consider buying individual stocks in December when other investors are tax loss selling.
2. Average down on a company only once at the most. After that, if you really believe in the company, consider selling the stock and buying it back after a month in order to lock in the tax loss.
3. Only invest in securities that have the potential for at least a 50% return.
4. Invest in companies that have existed for a minimum of 10-years.

Given Benj recommends a portfolio of 15-25 stocks diversified across different sectors, I was curious if screening the TSX for companies that met some of his investment criteria would yield a sufficient pool of candidates to choose from. The below screen was generated using the following criteria:

1. Listed on the TSX (1482 companies)
2. Market capitalization over $100M (813 companies)
3. Share price less than $25 (597 companies)
4. A minimum of 10-year operating history (372 companies)
5. Dividend yield greater than 0% (185 companies)**
6. Current share price down at least 33% from the 52-week high (10 companies)

** Although Benj Gallander appreciates stocks that pay dividends, it is not a strict screening criterion. I decided to add a positive dividend yield in order to narrow down the list of potential contrarian buys and make the screen more relevant to dividend investors. 


The above group of companies provides exposure to the financial (HCG), consumer discretionary (HLF and HBC), commodity (YRI), and energy (BNP) sectors. If any of the names are of interest to you, it is worth considering another of Benj's timeless tips: watch a company for a minimum of six months before investing in them. Such caution is warranted given the inherently riskier nature of stocks trading far off of their 52-week high prices. Regardless of your perception of the above contrarian stock screen, I highly recommend reading The Contrarian Investor's 13 as it provides a great deal of insight into what makes a contrarian investor successful in the Canadian market.

Would you consider investing in any of the 10 companies listed above???

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