Stingy Investor Search - Contact - Subscribe - Login
  Home | Articles | Links | SNW
The Screaming Value portfolio

The first snow of the season blew through Toronto last week, and I'm already done with winter. Alas, it's not done with me.

Investing also has its seasons, but they can last for years. Today I'm going to take a look at a successful but volatile value-investing approach and its hot and cold periods over more than two decades.

Most investors are familiar with the price-to-earnings ratio (P/E), which is an old measure of value. The enterprise-value-to-EBIT ratio (EV/EBIT) is a modern take on the P/E ratio. Looking at its components, enterprise value is - in simple terms - the market value of a company's equity plus its net debt. EBIT is an abbreviation for earnings before interest and taxes.

Seeking stocks with low-EV/EBIT ratios tends to lead to cyclical firms that have posted unusually good results over the prior four quarters. That might be all fine and dandy when the firm is in an upward cycle, but it can be painful on the way down. However, the ratio has a good record of finding bargains over the long term.

The strength of the EV/EBIT ratio is illustrated by the Screaming Value portfolio, which starts with the largest 300 stocks on the TSX by market capitalization and then picks the 10 with the lowest ratios. The portfolio is rebalanced each month when an equal amount of money is invested in each stock. (The returns herein are based on monthly or annual data from Bloomberg. They include dividend reinvestment, but do not include inflation, taxes or trading frictions.)

The Screaming Value portfolio posted average annual returns of 13.3 per cent from the start of 2000 through to the end of October, 2022. By way of comparison, the S&P/TSX Composite Index trailed badly with average annual returns of 6.5 per cent over the same period. You can examine the portfolio's growth, along with that of the market index, in the accompanying graph.

Screaming Value's Big Bumpy Gains

Big profits were also earned by value investors who rebalanced the portfolio once a year rather than once a month. The Screaming Value portfolio gained an average of 16.7 per cent annually from the start of 2000 through to the start of 2022 with annual rebalancing. The S&P/TSX Composite Index climbed by an average of 7 per cent annually over the same period.

But the second graph puts the screaming into the Screaming Value portfolio because it shows how far it fell in down periods. It also includes similar data for the market index.

Putting the screaming into Screaming Value

For instance, the portfolio suffered from a shocking decline of 71 per cent from its high in the summer of 2007 to its low in early 2009. Such a decline would have prompted many investors to be just as done with the strategy as I am with winter.

The portfolio also lagged as interest rates climbed in 2018, and then the COVID-19 crash arrived to push it down 58 per cent by the end of March, 2020. It was a poor period for both the portfolio and value investing more generally.

The portfolio's weak performance in hard times is partly attributable to its focus on just 10 stocks. A similar portfolio composed of the 20 stocks with the lowest EV/EBIT ratios fared a bit better in hard times, but it still gave up 65 per cent in the 2008 crash.

You can find the stocks that currently pass the Screaming Value test, along with updates to Frugal Dividend, Stable Dividend, and Dividend Monster portfolios below.

Despite its good long-term record, I admit to being hesitant when it comes to the portfolio's near-term prospects, given its past behaviour in big crashes. I worry that a winter storm might be headed toward the market in the form of a recession - or worse. But I also like to keep track of the portfolio during downturns because its rebounds have been mindbogglingly strong.

Screaming Value portfolio: Algoma Steel, Canaccord Genuity, Canfor, Centerra Gold, Frontera Energy, Interfor, Parex Resources, Stelco Holdings, Torex Gold Resources, West Fraser Timber

First published in the Globe and Mail, November 20 2022.

Globe & Mail Articles

 Dividend All-Stars for 2024
 250 Megastars for 2024
 Extreme yields
 The easy way
 Smaller stable dividend
 250 Megastars for 2023
 Champagne portfolio
 Screaming Value
 Blended momentum
 Dividend monster
 Frugal dividend
 Stable dividend
 Speads and recessions
 TSX 60 for value investors
 Looking at 10-year returns
 Watching for a bottom
 Oh, bother!
 Indexing advice
 Media-shy stocks
 Curse of size
 Market uncertainty
 Be even lazier
 Scary beats safe
 Small, illiquid, value
 Use the numbers
 What value is good value?
 Sculpt for value
 Value vs CAPE
 Graham Rules
 CAPE vs PeakE
 Top value ratio
 Low Beta
 Value and dividends
 Walter Schloss
 Try unloved AIG
 Why I'm a value investor
 New world of ETFs
 Low P/Es possible
 10 yielders
 Be happier
 Dividend Downside
 Shiller's P/E
 Copycat investing
 Cashing in on class
 Index roulette
 Theory collides
 Diving too deep
 3 retirement villains
 Scourge of inflation
 Economic omens
 Analyst Expectations
 Value stock scarcity
 It's all in the index
 How to pick good funds
 Low Beta Wins
 Hunt for dividend stocks
 Think garage sale

MoneySaver Articles
 2 Graham Stocks for 2018
 2 Stingy Stocks for 2017
 2 Graham Stocks for 2017
 3 Stingy Stocks for 2016
 5 Graham Stocks for 2016
 3 Stingy Stocks for 2015
 3 Graham Stocks for 2015
 3 Stingy Stocks for 2014
 4 Graham Stocks for 2014
 8 Stingy Stocks for 2013
 6 Graham Stocks for 2013
 9 Stingy Stocks for 2012
 8 Graham Stocks for 2012
 Simple Way 2011
 5 Stingy Stocks for 2011
 7 Graham Stocks for 2011
 Simple Way 2010
 5 Stingy Stocks for 2010
 8 Graham Stocks for 2010
 Simple Way 2009
 Timing Temptation
 19 Stingy Stocks for 2009
 4 Graham Stocks for 2009
 Simple Way 2008
 Active at Passive Prices
 Unbundling ETFs 2008
 5 Stingy Stocks for 2008
 5 Graham Stocks for 2008
 Is your index too active?
 Graham's Simple Way
 Canadian Graham Stocks
 5 Stingy Stocks for 2007
 8 Graham Stocks for 2007
 Top SPPs
 The Simple Way
 A hole in your IPO?
 Monkey Business
 8 Stingy Stocks for 2006
 Graham Stock Gainers
 Blue-Chip Blues
 Are Dividends Safe?
 SPPs for 2005
 Graham's Simplest Way
 Selling Graham Stocks
 RRSP Money Market Funds
 Stingy Stocks for 2005
 High Performance Graham
 Intelligent Indexing
 Unbundling Canadian ETFs
 A history of yield
 A Dynamic Duo
 Canadian Graham Stock
 Dividends at Risk
 Thrifty Value Stocks
 Stocks in Short Supply
 The New Dividend
 Hunting Goodwill
 SPPs for 2003
 RRSP: don't panic
 Desirable Dividends
 Stingy Selections 2003
 10 Graham Picks
 Growth Eh?
 Timing Disaster
 Dangerous Diversification
 The Coffee Can Portfolio
 Down with the dogs
 Stingy Selections
 Frugal Funds
 Graham Revisited
 Just Spend It
 Ticker Temptation
 Stock Mortality
 Focus on Fees
 SPPs for the Long Term
 Seeking Solid Stocks
 Relative Strength
 The VR Approach
 The Irrational Investor
 Value Investing

Old MS Articles
 Cdn Top 200 2018
 Cdn Top 200 2017
 Cdn Top 200 2016
 Cdn Top 200 2015
 Cdn Top 200 2014
 Cdn Top 200 2013
 Cdn Top 200 2012
 Cdn Top 200 2011
 Cdn Top 200 2010
 Cdn Top 200 2009
 Cdn Top 200 2008
 Cdn Top 200 2007
 Cdn Top 200 2006
 Cdn Top 200 2005
 US Top 500 2018
 US Top 500 2017
 US Top 500 2016
 US Top 500 2015
 US Top 500 2014
 US Top 500 2013
 US Top 500 2012
 US Top 500 2011
 US Top 500 2010
 US Top 500 2009
 US Top 500 2008
 US Top 500 2007
 US Top 1000 2006
 Dividends 100 2017
 Dividends 100 2016
 Retirement 100 2015
 Retirement 100 2014
 Retirement 100 2013
 Retirement 100 2012
 Retirement 100 2011
 Retirement 100 2010
 Income 100 2009
 Income 100 2008
 Income 100 2007
 Top Trusts 2006
 Top Trusts 2005
 Hot Potato
 Buffett Buys
 Stocks that pay
 Value in the S&P500
 Where to invest $100k
 Where to invest $10k
 Summer Simple Way
 A crystal ball for stocks?
 Cheap & safe
 Risky business
 Dividend investing
 Value investing
 Momentum investing
 Low P/E P/B
 Dividend growers
 Graham's prescription
 The case for optimism
 Wicked investments
 Simply spectacular
 Small stocks, big profits
 Value that sizzles
 So simple it works
 No assembly required
 Investing by the book
 Invest like the masters
 A simple way to get rich
 Stocks for cannibals
 Car bites dogs
 So easy, so profitable
 Dogs of the Dow
 Money for nothing
 Yield of dreams
 Return of the master

Advisor's Edge Articles
 Passive Rebundling
 Doing the math

Flip Books

About Us | Legal | Contact Us
Disclaimers: Consult with a qualified investment adviser before trading. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, financial advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. More...