These stocks will help your portfolio keep an even keel

Tim Hortons plays solid defence, but so do Enbridge, BCE and Shaw Communications.

The Portfolio Strategy column's latest survey of stock market risk suggests this group of stocks were among the least volatile in the Canadian market this week.

There's no such thing as a safe stock. But there are many levels of risk in the stock market, and there's no better tool for analyzing them than a website called RiskGrades.com. In the Canadian market, RiskGrades tells us that bonds are less than half as risky as stocks. Globally, this free website indicates that U.S. stocks are riskier than Canadian stocks, and that the global markets are still more dangerous.

The appeal of RiskGrades is that it allows users to make comparisons of risk between investments of all kinds, all points of origin and all currencies. It does this through a two-step process that assesses the variation in the price of an individual security and then compares it to the volatility of a basket of global stocks. Cash has a RiskGrade of 0 - from there, a higher score means more risk. Note: The RiskGrades you'll see here are snapshots in time that will inevitably change based on day-to-day stock market trading patterns.

A week ago, it looked like the stock markets were headed into a serious correction. Now, after an up-and-down week, uncertainty rules. What a perfect time to consider the risks in your portfolio.

Stocks Versus Bonds


A note on methodology: Exchange-traded funds that track Canadian bond indexes are used here because the indexes themselves are not included in the RiskGrades database.
Bond Index/ETF	Ticker	RiskGrade
iShares DEX Short Term Bond Index Fund	XSB	17
iShares DEX Universe Bond Index Fund	XBB	24
iShares DEX Long Term Bond Index Fund	XLB	33
iShares DEX All Corporate Bond Index Fund	XCB	26
BMO High Yield US Corporate Bond Hedged to CAD Index ETF	ZHY	62
iShares DEX Real Return Bond Index Fund	XRB	35
Notes: Short-term bonds are the safest thing, aside from cash, to have in your portfolio according to this risk survey. You could easily substitute a ladder of GICs with maturities of one through five years. The universe bond index, including corporate as well as government bonds, is a little more risky, but not much. Same for corporate bonds. Where you run into real risk is with high-yield bonds, which are more like stocks in their behaviour than bonds. Real-return bonds offer protection against inflation, but they come across here as being riskier than some other bond options.

Canadian Stock Market Sectors


Sector	RiskGrade	Sector	RiskGrade
Consumer discretionary	65	Industrials	90
Consumer staples	52	Information technology	87
Energy	101	Materials	113
Financials	73	Telecom Services	46
Health care	78	Utilities	70
Notes: The surprise here is how low on the risk scale the telecom sector is. There are only five stocks in this sector and all but one, Manitoba Telecom Services, have done well in the past month of stock market ups and downs. In fact, telecom stocks are the best performing TSX sector this year, ahead of materials and financials. Note that telecom giants BCE and Telus have dividend yields in the area of 5 per cent.

Blue-Chip Canadian Stocks: The S&P/TSX 60


Company	Ticker	RiskGrade	Company	Ticker	RiskGrade
Agnico-Eagle Mines	AEM	161	Inmet Mining	IMN	199
Agrium	AGU	141	Kinross Gold	K	190
Arc Energy Trust	AET.UN	126	Loblaw	L	87
Bank of Montreal	BMO	96	Magna Int.	MG.A	220
Bank of Nova Scotia	BNS	82	Manulife Financial	MFC	112
Barrick Gold	ABX	157	Metro Inc.	MRU.A	96
BCE	BCE	69	National Bank of Cda	NA	90
Biovail	BVF	109	Nexen	NXY	126
Bombardier	BBD.B	190	Penn West Energy	PWT.UN	133
Brookfield Asset Mgt	BAM.A	91	Potash Corp.	POT	145
Cameco	CCO	105	Power Corp.	POW	100
Cdn Ntnl Railway	CNR	115	Research in Motion	RIM	151
Cdn Natural Res.	CNQ	122	Rogers Communctns	RCI.B	96
Cdn Oil Sands Trust	COS.UN	139	Royal Bank of Cda	RY	95
Cdn Pacific Rail	CP	134	Saputo	SAP	80
Canadian Tire	CTC.A	127	Shaw Communctns	SJR.B	72
Cenovus Energy	CVE	163	Shoppers Drug Mart	SC	125
CIBC	CM	91	SNC-Lavalin	SNC	118
Eldorado Gold	ELD	207	Sun Life Financial	SLF	110
Enbridge	ENB	67	Suncor Energy	SU	146
EnCana	ECA	114	Talisman Energy	TLM	137
Enerplus Resources	ERF.UN	106	TD Bank	TD	88
First Quantum Min.	FM	243	Teck Resources	TCK.B	238
Fortis	FTS	119	Telus Corp.	T	80
George Weston	WN	100	Thomson Reuters	TRI	100
Gildan Activewear	GIL	150	Tim Hortons	THI	80
Goldcorp	G	171	TransAlta Corp.	TA	98
Husky Energy	HSE	115	TransCanada Corp.	TRP	82
Iamgold	IMG	234	Yamana Gold	YRI	180
Imperial Oil	IMO	101	Yellow Pages	YLO.UN	144
Notes: Now you see how there's no such thing as a safe stock. We have the 60 largest, most heavily traded Canadian stocks here and the lowest RiskGrade is the 67 scored by the doughnut chain Tim Hortons. Mining stocks -- hello, Teck -- are among the most volatile stocks on this list. The financial stocks listed here come off pretty well, utilities are middling.

Blue-Chip U.S. Stocks: The Dow Jones Industrial Average


Company	Ticker	RiskGrade	Company	Ticker	RiskGrade
Alcoa	AA	190	JP Morgan Chase	JPM	150
American Express	EXP	191	Kraft Foods	KFT	82
Boeing	BA	162	Coca-Cola	KO	85
Bank of America	BAC	195	McDonald's	MCD	85
Caterpillar	CAT	195	3M	MMM	109
Cisco Systems	CSCO	144	Merck	MRK	130
Chevron	CVX	112	Microsoft	MSFT	102
Dupont	DD	152	Pfizer	PFE	105
Walt Disney	DIS	138	Procter & Gamble	PG	78
General Electric	GE	171	AT&T	T	82
Home Depot	HD	124	Travelers	TRV	98
Hewlett-Packard	HPQ	140	United Technologies	UTX	124
IBM	IBM	108	Verizon Comms.	VZ	84
Intel	INTC	149	Wal-Mart	WMT	64
Johnson & Johnson	JNJ	69	Exxon-Mobil	XOM	88
Notes: Introducing the low-risk champ in this survey of stock market risk, Wal-Mart. Makes sense -- Wal-Mart is in the consumer staples sector, and that's a classic refuge in volatile markets. Notice how the Dow is home to more than a few of these lower-risk stocks, including Johnson & Johnson, Procter & Gamble and Kraft.
Source: RiskGrades.com

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