Large cap investment ideas

Here is another look at TSX 60 companies (as of September 16, 2011) to find companies that are reasonably priced, but also present a good probably for price appreciation.

CIBC (CM) does not appear expensive, with a P/E of 11.4. That’s lower than Royal Bank and TD Bank, but the same as BMO and ScotiaBank. CIBC’s debt to equity ratio of 0.37 is highest among the big five banks, but price action is also the best. Perhaps investors were worried about debt levels, but now the price is “catching up”? The price is 3.6% higher than a month ago, compared to between -3% and -10% for the other banks. All the bank shares are lower over 3 and 6 months, but CM has performed the best. CIBC is the only one with positive performance over the last year, although it’s had disappointing performance, hence my catching up theory.

Canadian Tire (CTC.A) has a P/E of 9.9, which is relatively cheap. It’s currently among the 10 cheapest stocks (by that measure) in the TSX 60. The debt to equity ratio isn’t impressive, but at 0.57 it isn’t unreasonable either. The price action is positive, rising 6.3% over the last month. The 3 and 6 month numbers aren’t positive, like the rest of the market. But beating the market by 8.7% over the last month, to me, indicates potential for continued appreciation.

Gildan Activewear (GIL) is a little more expensive than the prior two entries, with a P/E of 12.9, but its debt to equity ratio is just 0.21, making this company appear well balanced between price and risk. It’s 5% cheaper than a year ago, and it’s 12% lower than just three months ago. That may not prove that it’s a bargain, but the share price has moved up 10% over the last month, while the market has fallen another 2.5%. This implies that money is moving into Gildan, and it may be possible to profit by getting in front of that demand.

Inmet Mining (IMN) is the most impressive looking of this group. With a P/E of 8.4, almost no debt (1% of equity) and a price that’s 4% higher than a month ago, outperforming the market. There aren’t many stocks right now that have positive price movement, so it makes sense to look among these for investment ideas.

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