Company

Catch these companies on the rebound

Wednesday, November 5, 2008

WHAT WE'RE LOOKING FOR

Canadian stocks that are likely to recover from deep losses suffered in the past few months, despite a slowing economy and a general consensus that if we're not in a recession right now, then it is just around the corner.

TODAY'S SCREEN

Canaccord Adams Inc. created a screen to identify its top picks to rebound, given the market volatility. To make the list, a company had to be down more than 50 per cent from its peak, have at least two years of cash or funding at its disposal, be cash flow positive (or about to be) and be large and liquid.

WHAT WE FOUND

With the S&P/TSX down 26.86 year to date, finding companies more than 50 per cent off their peak wasn't the challenge. And with the energy subindex down 25.47 per cent since the beginning of the year and oil and gas companies coming off a year of record-high prices for their commodities, it probably shouldn't come as a surprise that companies such as EnCana Corp. and Suncor Energy Inc. have been both beaten back and banking huge amounts of cash.

Indeed, EnCana could finance its capital programs solely with its savings, and still have an unallocated surplus of up to $2-billion (U.S.).

Miners were also heavily represented, with six companies making the 18-company list. Iamgold Corp., for example, is down 54.7 per cent from its 52-week high but has $1 per share in net working capital. Potash Corp. of Saskatchewan is down by 56.2 per cent from its mid-June highs, but generated free cash flow of $1.8-billion over the last 12-months.

Canaccord also included three small-cap picks in its list: infrastructure company Aecon Group Inc., solar-lighting microcap Carmanah Technologies Corp., and broadband-equipment maker Sandvine Corp.

Table: View result set