The CART Model

One of the greatest challenges in investing in individual companies is in identifying which companies to invest in. There are literally thousands of stocks to choose from, and trying to find great value is like looking for a needle in a haystack at times.

One of the easiest things to do is to use a stock screener, of which there are several. A stock screener will let you filter through all of the stocks on a particular exchange, based on preset criteria. For example, you could do a screen on the common shares of stocks listed on the TSX, with a P/E ratio of less than 30, that pay a minimum annual dividend of $0.50/share:

Your screener would then output a list of companies that match that criteria.

Often, some screeners have pre-built screens, such as the one at Yahoo:

However, a stock screen is only the first step. The challenge with screens is that they typically only show the most recent year’s worth of data. For that reason, you often have to dig a little deeper. That said, pulling the past ten years of fundamental data to drop into a spreadsheet is not a trivial task: you often have to collect the data directly from a companies annual filings found on SEDAR or Edgar, which takes a considerable amount of time. However, often service providers such as BMO InvestorLine or The Globe and Mail have the most recent few years of data available.

Historical Data from BMO InvestorLine

Historical Data from BMO InvestorLine

Globe and Mail

Historical Data from The Globe and Mail – Globe Investor

To that end, I have created the CART model:

  • Cursory
  • Analysis
  • Research
  • Template

I’ve already covered a few companies using the CART model on Seeking Alpha:

The CART model provides me with a template for doing a high level analysis of a company by importing data from BMO InvestorLine. This high level analysis:

  • Looks at the most recent 5 years of data (vs. a standard analysis of 10 years)
  • Gives a quick view of underlying fundamental data such as:
    • Revenue
    • Balance sheet
    • Earnings and Dividends
  • Provides a quick view of how under or overvalued the stock is

The resulting template then lets me make a decision if I should go forward with a deeper analysis, which usually covers a wider timeframe (e.g. 10 years), and goes into more fundamental comparisons with competitors, a more detailed SWOT analysis, etc. All of this allows me to maximize my time in searching for value dividend payers, to help improve the returns on the overall portfolio.

Onwards and upwards!