Piotroski-Style Bargains at Home, and North of the Border

In a “Number Cruncher” column for Canada’s Globe and Mail, Ian McGugan takes a look at some overlooked bargain-priced stocks using Validea.com’s Joseph Piotroski-inspired strategy. 

“Piotroski, a professor at Stanford University, has discovered that applying a battery of accounting tests to a portfolio of value stocks can improve returns by eliminating ones that are financially too weak to recover and spotlighting ones with improving fundamentals,” McGugan writes, explaining that Validea’s Piotroski-inspired model targets stocks in the top 20% of the market based on their book/market ratios (which is the same as stocks with the lowest price/book ratios). Then it applies a variety of accounting-based fundamental tests, looking at such variables as return on assets, cash flow from operations, and current ratio.

McGugan offers a handful of stocks that get high marks from Validea’s Piotroski-based model, with some trading in the U.S. and some trading in Canada. Among them: Resolute Forest Products, which gets a 90% score from the model. To read the full article, click here.