Friday, April 7, 2017

Three Screens from the "Market Masters" Book

I recently read the book "Market Masters" by Robin Speziale which contains interviews with 28 of Canada's best known investors.  It was refreshing how forthcoming the investors were explaining the investment strategies that they followed and critiquing their own past investment decisions. One of the big takeaways from the book is that there are many different strategies to make money through investing so one must remain open in order to be successful in the long-term. In that light, the three screens below are based on different investment strategies outlined in the book.

High Free Cash Flow Yield 

Barry Schwartz searches for companies that have free cash flow yields of 8% or higher and competitive advantages.  In order to narrow down the results, I filtered for a minimum 2% dividend yield and at least 1% dividend growth over the last year. The following list of 21 companies contains many familiar names for Canadian dividend growth investors.

High ROE

Jason Donville invests in companies that have maintained their return on equity of at least 20% over seven years. Companies that meet his demanding criteria tend to be excellent capital allocators. Although the screening tools I used did not allow me to review ROE over seven years, I included a list below based on the 20% ROE benchmark over the last 12-months, a minimum 2% dividend yield, and at least 1% dividend growth over the past year. It is interesting to note once again the number of familiar names for Canadian dividend growth investors.

Beat the TSX

I first heard of Ross Grant's 'Beat the TSX' investment strategy on local blogger Mark Seed's myownadvisor site. The strategy is comparable to the 'Dogs of the Dow' philosophy and consists of buying equal dollar amounts of the 10 stocks in the S&P TSX 60 index with the highest dividend yields. Stocks are held for a year and then rebalanced based on year end prices. By limiting the investment universe to the 60 largest companies in Canada by market capitalization, you're buying large companies trading at relatively low prices. Although one cannot follow this strategy blindly, there are many interesting and familiar names in the list of 10 highest yielders at December 31st, 2016.

I would highly recommend reading the interviews in Market Masters with an open mind. Hearing from Bill Ackman (not Canadian, but with a long history of making big investments in Canadian companies) and Derek Foster was particularly enlightening given my preconceptions of both investors were changed after reading what they had to say. From momentum, to charting, to quantitative based approaches, to extreme value, everyone can benefit from learning about different investment strategies.

Which investment strategy different than your own do you find the most interesting?

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