The Globe and Mail reports in its Wednesday edition that when Bank of Nova Scotia reported strong quarterly results on Tuesday, it gave a big boost of credibility to a stockpicking strategy called buying last year's laggard. The Globe's David Berman writes that Scotiabank's stock has been the best performer among the big banks this year and the gains seem justified by a fourth-quarter profit of more than $2-billion.
Scotiabank lagged last year. The share price slumped 15 per cent in 2015. Mostly, investors were worried about its international operations, which were focused on developing economies in Latin America when this region was struggling with low commodity prices and shifting U.S. monetary policy.
In his stockpicking strategy, Mr. Berman figures that there is a 40-per-cent chance that the dog you buy will blossom into this year's top performer. This strategy -- which echoes the Dogs of the Dow -- has delivered an average annual gain of more than 16 per cent, using numbers going back to 1999, versus 10 per cent for the index. These numbers do not include dividends.
Importantly, the strategy also delivered better returns than buying and holding a single bank stock, such as TD or Royal Bank.
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