What are we looking for?
Trending Canadian-listed stocks using Trading Central’s Quantamental factor methodology.
The S&P/TSX Composite Index has bounced off its 200-day moving average at 24,130, gaining 1.14 per cent year-to-date and trading within 3 per cent of its Jan. 30 record high as of Thursday morning. That outperforms the S&P 500, which has declined 3.48 per cent over the same period. To identify the stocks driving Canadian equities higher, we applied a trend following quantitative methodology to screen for top-performing Canadian-listed stocks.
The screen
We used Trading Central’s Strategy Builder to identify Canadian-listed stocks moving higher based on price trends, momentum, and growth factor ratings. Quantamental factor investing combines quantitative and fundamental analysis to help identify equity leaders across various sectors.
The TC Quantamental Momentum Factor measures the tendency of winning stocks to sustain their strong performance in the near term. To focus on the top-trending Canadian stocks, we set a minimum momentum rating of 70 out of 100. Additionally, we applied a minimum TC Quantamental Growth factor rating of 55 out of 100, which considers year-over-year changes in price-to-earnings (P/E), earnings per share (EPS) growth, and revenue growth, reinforcing a trend-following strategy with fundamental support.
To ensure our screen targets larger, established companies, we set a minimum market capitalization threshold of $1-billion. For reference, we included each stock’s price-to-earnings ratio, year-to-date, one-year price performance and dividend yield.
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
Topping our list is Lundin Gold Inc. LUG-T, a Canadian mining company focused on gold production in Ecuador. The stock boasts a TC Quantamental Momentum Factor rating of 93, reflecting its impressive price strength and trend-following characteristics. Year-to-date, Lundin Gold has surged 38.4 per cent, the highest gain on our list. The company also has a strong TC Growth Factor Rating of 81, indicating strong earnings and revenue growth. Additionally, the stock offers a decent dividend yield of 2.54 per cent, which is among the highest in its industry, making it an attractive option for investors seeking both growth and income.
Another gold mining company, Kinross Gold Corp. K-T, has also made the list owing to its impressive price performance. The stock has delivered impressive price performance with year-to-date and one-year returns of 22.7 per cent and 124.1 per cent, respectively, supported by a TC Quantamental Momentum Factor rating of 87 out of 100, indicating sustained price strength. Additionally, Kinross holds a strong TC Growth Factor rating of 81. With gold prices remaining firm, Kinross continues to benefit from strong demand and a favourable macroeconomic environment, making it a key performer in our trend-following stock screen.
In a screen dominated by metals and mining stocks, insurance company Great-West Lifeco Inc. GWO-T ranks second on the list owing to strong momentum and growth ratings of 74 and 75, respectively. The stock has the highest dividend yield on the list at 4.66 per cent, followed by Bank of Montreal BMO-T at 4.53 per cent.
When employing a trend-following strategy, it is essential to use stop-loss orders to manage risk and protect gains. Trend-following stocks can experience sharp reversals, making it critical to set a stop-loss at key support levels or a percentage below recent highs to lock in profits while allowing the trend to develop. This disciplined approach helps limit downside risk.
Trading Central Strategy Builder provides a back-testing capability to evaluate how well an investing strategy would have worked in the past. Using a five-year historical period with quarterly rebalancing, the screen described had a 15-per-cent annualized return, in-line with the S&P/TSX Composite Index.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.
Gary Christie is head of North American research at Trading Central in Ottawa.