With both analysts and retail investors fearing rate hikes in 2015, this months 5i filter is focusing on companies that carry low debt in their corporate structure, with a focus on short-term debt coverage, that are able to turn inventory into sales very quickly throughout the year. Hikes have been held off in both the US and Canada, but the speculation of these raises has been a factor in the volatile markets as of late.
The operations of these companies should involve more liquid assets that do not have a long turnaround time which helps to further reduce balance sheet risk as the companies will be continually generating cash flow to pay debt obligations, opposed to a company that may be reliant on a handful of large contracts. The low debt and good balance sheet liquidity should protect the names in a downturn. The specific metrics we used for this screen include:
- Market Capitalization >500M
- Annual Inventory Turnover Between 2-10
- Current Ratio >2
- Debt/Common Equity <40%
| Ticker | Company Name | Company Market Cap (CAD) |
Total D/E, Percent (FY0) |
Inventory Turnover (FY0) |
Current Ratio (FY0) |
| NDQ.TO | Novadaq Technologies Inc | 982,842,657 | 0.0% | 4.65 | 21.72 |
| AGI.TO | Alamos Gold Inc | 1,218,984,737 | 0.0% | 3.87 | 18.92 |
| AVO.TO | Avigilon Corp | 860,220,376 | 0.0% | 5.21 | 7.55 |
| SSO.TO | Silver Standard Resources Inc | 540,809,203 | 22.2% | 2.49 | 6.61 |
| WPK.TO | Winpak Ltd | 2,088,283,752 | 0.0% | 5.55 | 5.39 |
| DDC.TO | Dominion Diamond Corp | 1,798,794,379 | 0.3% | 2.34 | 5.04 |
| FVI.TO | Fortuna Silver Mines Inc | 748,330,082 | 1.0% | 6.75 | 4.95 |
| LUC.TO | Lucara Diamond Corp | 751,150,776 | 0.0% | 4.46 | 4.79 |
| PAA.TO | Pan American Silver Corp | 1,805,416,215 | 3.0% | 2.52 | 4.77 |
| ELD.TO | Eldorado Gold Corp | 5,673,171,430 | 11.5% | 2.71 | 4.22 |
| DML.TO | Denison Mines Corp | 556,307,393 | 0.0% | 5.32 | 4.11 |
| AEM.TO | Agnico Eagle Mines Ltd | 7,241,491,491 | 36.8% | 2.68 | 3.79 |
| BTO.TO | B2Gold Corp | 2,101,153,593 | 18.8% | 6.78 | 3.79 |
| IMG.TO | IAMGOLD Corp | 1,394,597,599 | 22.6% | 2.88 | 3.42 |
| K.TO | Kinross Gold Corp | 4,386,561,509 | 35.2% | 2.20 | 3.37 |
| GIL.TO | Gildan Activewear Inc | 7,923,153,184 | 7.8% | 2.47 | 3.33 |
| RETa.TO | Reitmans Canada Ltd | 500,579,239 | 1.7% | 3.72 | 2.80 |
| AUQ.TO | AuRico Gold Inc | 1,123,284,487 | 14.1% | 2.81 | 2.56 |
| CCO.TO | Cameco Corp | 7,327,683,021 | 25.9% | 2.48 | 2.49 |
| RON.TO | Rona Inc | 1,558,634,238 | 10.6% | 3.80 | 2.45 |
| WEF.TO | Western Forest Products Inc | 1,056,006,185 | 23.1% | 6.14 | 2.34 |
| TIH.TO | Toromont Industries Ltd | 2,130,265,851 | 23.0% | 3.67 | 2.18 |
| IFP.TO | Interfor Corp | 1,385,991,550 | 28.2% | 7.61 | 2.07 |
| XTC.TO | Exco Technologies Ltd | 504,766,109 | 11.5% | 8.05 | 2.00 |
This screen covers all industries, but with the screen searching for high product demand and low debt, the results largely included materials, industrials and a few retail operators & manufacturers.
We also see many of our covered equities, with investors’ favourite stock to hate, Avigilon, near the top of the list. Dorel Industries, Exco Technologies, Winpak and Gildan Activewear are also represented. We find the high number of materials names interesting and feel that in this type of environment, strong balance sheets are the way to go for the sector. When/if materials prices turn around, these companies should see little drag on earnings and lots of opportunity to reinvest their cash flows (or even borrow) into more growth projects.
Comments
Login to post a comment.