Skip to main content

The Globe and Mail

After summer lull, 20 stocks with momentum on their side

Raffi Alexander/Getty Images/iStockphoto

What are we looking for?

Canadian stocks that are positioned to do well over the next six months.

How we did it

Story continues below advertisement

Craig McGee, senior consultant at CPMS Morningstar Canada, notes that market activity tends to hit a summer lull and slow down during the second and third quarter each year. As a result, market performance tends to be a bit weaker during those months, before picking up in the next two quarters.

That suggests that now is a fine time to be positioning your portfolio for what lies ahead. Which stocks tend to do best over this period? Mr. McGee ran hundreds of tests with CPMS data dating back to 1985 to find the variables that tend to shine most reliably.

He found that stocks with momentum – rising prices and earnings – are usually the best bets. The accompanying list of 20 Canadian stocks have the most attractive combinations of some of the highest scoring momentum metrics on Mr. McGee's tests. These metrics include:

-Upward revisions over the past three months to analysts' forecasts of the upcoming year's cash flow;

-Strong alpha over the past year (alpha is a measure of a stock's excess risk-adjusted return versus the TSX composite index);

-A strong, positive change over the past three months in the average price over the preceding six months;

-A high stock price relative to the stock's 200-day moving average;

Story continues below advertisement

-A strong, positive price change over the past 15 months.

Mr. McGee screened out the bottom quarter of the CPMS database, based on size and volume, to exclude stocks that aren't traded frequently.

More about Morningstar

Morningstar Inc. provides independent investment research in North America, Europe, Australia and Asia. Its research tool, Morningstar CPMS, provides quantitative North American equity research and portfolio analysis to institutional clients and financial advisers. CPMS data cover more than 95 per cent of the investable North American stock market.

What we found

Mr. McGee ran a back-test of the strategy from the end of February, 1999, until the end of August, 2013, assuming the portfolio was refreshed every three months. He found that the portfolio would have generated an annualized total return of 26.2 per cent versus 7.3 per cent for the S&P/TSX composite total return index.

Story continues below advertisement

The usual caveat applies: Past performance is no guarantee of future success. Do your own research before buying any of the stocks listed here.

Report an error Licensing Options
About the Author

Ian McGugan is a reporter with The Globe and Mail's Report on Business and has been writing about investing, economics and business for more than 20 years. He joined the Globe and Mail in 2010. He has been executive editor of Canadian Business magazine and founding editor of MoneySense magazine. More


The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at